UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

             |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2003

                         Commission File Number: 1-15607

                      JOHN HANCOCK FINANCIAL SERVICES, INC.
                Exact name of registrant as specified in charter

              DELAWARE                                  04-3483032
  (State or other jurisdiction of          (I.R.S. Employer Identification No.)
   incorporation or organization)

                               John Hancock Place
                               Post Office Box 111
                           Boston, Massachusetts 02117
                    (Address of principal executive offices)

                                 (617) 572-6000
              (Registrant's telephone number, including area code)

      Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

      Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|

      Number of shares outstanding of our only class of common stock as of
October 31, 2003:

                                   289,311,235
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                    September 30,
                                                                        2003         December 31,
                                                                     (Unaudited)        2002
                                                                    -----------------------------
                                                                           (in millions)
<S>                                                                 <C>             <C>
Assets
Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
   (fair value: September 30--$1,586.7; December 31--$1,781.8) ..   $     1,561.0   $     1,732.2
   Available-for-sale--at fair value
   (cost: September 30--$49,747.3; December 31--$44,755.0) ......        52,681.9        45,847.3
   Trading securities--at fair value
   (cost: September 30--$40.4; December 31-- $18.9) .............            40.8            18.9
Equity securities:
   Available-for-sale--at fair value
   (cost: September 30--$673.9; December 31--$624.7) ............           795.3           672.3
   Trading securities--at fair value
   (cost: September 30--$372.2; December 31--$287.5) ............           375.9           296.3
Mortgage loans on real estate ...................................        12,534.9        11,805.7
Real estate .....................................................           263.8           318.6
Policy loans ....................................................         2,107.8         2,097.2
Short-term investments ..........................................            92.2           211.2
Other invested assets ...........................................         3,109.0         2,937.8
                                                                    -------------   -------------

   Total Investments ............................................        73,562.6        65,937.5

Cash and cash equivalents .......................................         1,590.0         1,190.6
Accrued investment income .......................................           942.6           785.9
Premiums and accounts receivable ................................           270.2           217.1
Deferred policy acquisition costs ...............................         4,172.3         3,996.3
Reinsurance recoverable .........................................         2,171.7         1,777.2
Other assets ....................................................         3,486.1         3,132.2
Separate account assets .........................................        22,673.4        20,827.3
                                                                    -------------   -------------

   Total Assets .................................................   $   108,868.9   $    97,864.1
                                                                    =============   =============
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       2
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                    CONSOLIDATED BALANCE SHEETS - (CONTINUED)

<TABLE>
<CAPTION>
                                                                                 September 30,
                                                                                     2003          December 31,
                                                                                 (Unaudited)           2002
                                                                                 ------------------------------
                                                                                         (in millions)
<S>                                                                              <C>              <C>
Liabilities and Shareholders' Equity
Future policy benefits .......................................................   $    44,383.0    $    39,657.0
Policyholders' funds .........................................................        23,012.2         23,054.4
Consumer notes ...............................................................         1,059.6            290.2
Unearned revenue .............................................................         1,038.4            895.8
Unpaid claims and claim expense reserves .....................................           238.3            205.6
Dividends payable to policyholders ...........................................           628.3            585.7
Short-term debt ..............................................................           316.1            348.9
Long-term debt ...............................................................         1,483.0          1,450.3
Income taxes .................................................................         1,855.5          1,096.8
Other liabilities ............................................................         3,903.5          3,078.3
Separate account liabilities .................................................        22,673.4         20,827.3
                                                                                 -------------    -------------

      Total Liabilities ......................................................       100,591.3         91,490.3

Minority interest ............................................................           160.4            162.7

Commitments and contingencies - Note 4

Shareholders' Equity
Common stock, $.01 par value; 2.0 billion shares authorized; 319.3 million
   and 317.5 million shares issued, respectively .............................             3.2              3.2
Additional paid in capital ...................................................         5,153.6          5,127.9
Retained earnings ............................................................         2,347.9          1,614.0
Accumulated other comprehensive income .......................................         1,681.5            523.2
Treasury stock, at cost (30.0 million and 29.5 million
   shares, respectively) .....................................................        (1,069.0)        (1,057.2)
                                                                                 -------------    -------------

   Total Shareholders' Equity ................................................         8,117.2          6,211.1
                                                                                 -------------    -------------

   Total Liabilities and Shareholders' Equity ................................   $   108,868.9    $    97,864.1
                                                                                 =============    =============
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                       3
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                    Three Months Ended         Nine Months Ended
                                                                                      September 30,              September 30,
                                                                                    2003         2002          2003         2002
                                                                                  -----------------------------------------------
                                                                                           (in millions, except per share data)
<S>                                                                               <C>          <C>          <C>         <C>
Revenues
   Premiums ...................................................................   $ 1,034.3    $   806.7    $ 2,782.4   $ 2,512.7
   Universal life and investment-type product fees ............................       209.5        212.7        617.8       613.5
   Net investment income ......................................................     1,038.5        968.6      3,117.1     2,917.6
   Net realized investment and other gains (losses), net of related
     amortization of deferred policy acquisition costs, amounts credited to
     participating pension contractholders and the policyholder dividend
     obligation ($(35.5) and $27.4 for the three months ended September 30,
     2003 and 2002 and $(33.5) and $(5.6) for the nine months ended
     September 30, 2003 and 2002, respectively) ...............................       (58.3)       (30.7)        94.1      (255.4)
   Investment management revenues, commissions and other fees .................       138.9        129.3        393.0       419.7
   Other revenue ..............................................................        67.2         56.3        199.8       183.0
                                                                                  ---------    ---------    ---------   ---------

Total revenues ................................................................     2,430.1      2,142.9      7,204.2     6,391.1

Benefits and expenses
   Benefits to policyholders, excluding amounts related to net realized
     investment and other gains (losses) credited to participating
     pension contractholders and the policyholder dividend obligation
     ($(29.8) and $10.9 for the three months ended September 30, 2003 and
     2002 and $(43.0) and $0.4 for the nine months ended September 30,
     2003 and 2002, respectively) .............................................     1,522.9      1,303.4      4,274.3     4,002.2

   Other operating costs and expenses .........................................       439.2        333.3      1,253.9     1,116.6
   Amortization of deferred policy acquisition costs, excluding amounts
     related to net realized investment and other gains (losses) ($(5.7)
     and $16.5 for the three months ended September 30, 2003 and 2002 and
     $9.5 and $(6.0) for the nine months ended September 30, 2003 and
     2002, respectively) ......................................................        64.8        151.1        218.2       299.9
   Dividends to policyholders .................................................       161.0        143.6        443.6       438.3
                                                                                  ---------    ---------    ---------   ---------

   Total benefits and expenses ................................................     2,187.9      1,931.4      6,190.0     5,857.0
                                                                                  ---------    ---------    ---------   ---------

Income before income taxes ....................................................       242.2        211.5      1,014.2       534.1

Income taxes ..................................................................        51.4         53.4        280.3       131.2
                                                                                  ---------    ---------    ---------   ---------

Net income ....................................................................   $   190.8    $   158.1    $   733.9   $   402.9
                                                                                  =========    =========    =========   =========
</TABLE>


                                        4
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

            UNAUDITED CONSOLIDATED STATEMENTS OF INCOME - (CONTINUED)

<TABLE>
<CAPTION>
                                                      Three Months Ended  Nine Months Ended
                                                        September 30,       September 30,
                                                       2003         2002  2003         2002
                                                      -------------------------------------
                                                      (in millions, except per share data

<S>                                                   <C>       <C>       <C>       <C>
Basic earnings per common share:
Net income ........................................   $  0.66   $  0.55   $  2.55   $  1.38
                                                      -------   -------   -------   -------

Diluted earnings per common share:
Net income ........................................   $  0.66   $  0.54   $  2.54   $  1.37
                                                      -------   -------   -------   -------

Share data:
Weighted-average shares used in basic earnings
   per common share calculations ..................     287.7     289.5     287.4     293.0

     Dilutive securities:
     Stock options ................................       1.0       1.0       0.9       1.4
     Non-vested stock .............................       0.3       0.3       0.2       0.3
                                                      -------   -------   -------   -------

Weighted-average shares used in diluted earnings
   per common share calculations ..................     289.0     290.8     288.5     294.7
                                                      =======   =======   =======   =======
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                        5
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                  Additional            Accumulated Other                Total
                                          Common   Paid In    Retained    Comprehensive    Treasury  Shareholders'    Outstanding
                                          Stock    Capital    Earnings    Income (Loss)      Stock      Equity          Shares
                                          ----------------------------------------------------------------------------------------
                                                         (in millions, except outstanding share data in thousands)

<S>                                       <C>     <C>          <C>          <C>            <C>          <C>             <C>
Balance at July 1, 2002 ...............   $3.2    $5,114.4     $1,451.5     $  317.0       $  (918.8)   $5,967.3        292,192.9

Options exercised .....................                2.9                                                   2.9            205.6
Restricted stock ......................                2.0                                                   2.0               --
Forfeitures of restricted stock
Issuance of shares for board
   compensation .......................                0.1                                                   0.1              1.9
Treasury stock acquired ...............                                                       (124.9)     (124.9)        (4,046.5)

Comprehensive income:
   Net income .........................                           158.1                                    158.1

Other comprehensive income, net of tax:
   Net unrealized gains (losses) ......                                        (67.2)                      (67.2)
   Net accumulated gains (losses)
     on cash flow hedges ..............                                        161.6                       161.6
   Foreign currency translation
     adjustment .......................                                        (22.1)                      (22.1)
   Minimum pension liability ..........                                          1.2                         1.2
                                                                                                        --------
Comprehensive income ..................                                                                    231.6
                                          ----------------------------------------------------------------------------------------

Balance at September 30, 2002 .........   $3.2    $5,119.4     $1,609.6     $  390.5       $(1,043.7)   $6,079.0        288,353.9
                                          ========================================================================================

Balance at July 1, 2003 ...............   $3.2    $5,147.4     $2,157.1     $1,771.5       $(1,068.8)   $8,010.4        289,113.0

Options exercised .....................                2.6                                                   2.6            164.3
Restricted stock ......................                3.5                                                   3.5               --
Forfeitures of restricted stock .......                                                                                      (2.6)
Issuance of shares for board
   compensation .......................                0.1                                                   0.1              2.9
Treasury stock acquired ...............                                                         (0.2)       (0.2)

Comprehensive income:
   Net income .........................                           190.8                                    190.8

Other comprehensive income, net of tax:
   Net unrealized gains (losses) ......                                        (55.5)                      (55.5)
   Net accumulated gains (losses)
     on cash flow hedges ..............                                        (36.9)                      (36.9)
   Foreign currency translation
     adjustment .......................                                          0.7                         0.7

   Minimum pension liability ..........                                          1.7                         1.7
                                                                                                        --------
Comprehensive income ..................                                                                    100.8
                                          ----------------------------------------------------------------------------------------

Balance at September 30, 2003 .........   $3.2    $5,153.6     $2,347.9     $1,681.5       $(1,069.0)   $8,117.2        289,277.6
                                          ========================================================================================
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                        6
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                     AND COMPREHENSIVE INCOME - (CONTINUED)

<TABLE>
<CAPTION>
                                                    Additional            Accumulated Other                Total
                                           Common    Paid In    Retained    Comprehensive    Treasury  Shareholders' Outstanding
                                            Stock    Capital    Earnings    Income (Loss)      Stock      Equity       Shares
                                           -------------------------------------------------------------------------------------
                                                        (in millions, except outstanding share data, in thousands)

<S>                                          <C>    <C>        <C>           <C>           <C>          <C>           <C>
Balance at January 1, 2002 ...............   $3.2   $5,099.3   $1,206.7      $  228.0      $  (672.2)   $5,865.0      297,430.1

Options exercised ........................              12.4                                                12.4          847.7
Restricted stock issued ..................               4.4                                                 4.4          637.8
Restricted stock amortization ............               3.1                                                 3.1
Forfeitures of restricted stock ..........              (0.1)                                               (0.1)          (8.7)
Issuance of shares for board
   compensation ..........................               0.3                                                 0.3            5.1
Treasury stock acquired ..................                                                    (371.5)     (371.5)     (10,558.1)

Comprehensive income:
   Net income ............................                        402.9                                    402.9

Other comprehensive income, net of tax:
   Net unrealized gains (losses) .........                                      (24.6)                     (24.6)
   Net accumulated gains (losses)
     on cash flow hedges .................                                      176.9                      176.9
   Foreign currency translation
     adjustment ..........................                                        6.5                        6.5
   Minimum pension liability .............                                        3.7                        3.7
                                                                                                        --------
Comprehensive income .....................                                                                 565.4
                                           -------------------------------------------------------------------------------------

Balance at September 30, 2002 ............   $3.2   $5,119.4   $1,609.6      $  390.5      $(1,043.7)   $6,079.0      288,353.9
                                           =====================================================================================

Balance at January 1, 2003 ...............   $3.2   $5,127.9   $1,614.0      $  523.2      $(1,057.2)   $6,211.1      287,978.6

Options exercised ........................               6.6                                                 6.6          442.9
Restricted stock .........................              18.4                                                18.4        1,245.6
Forfeitures of restricted stock ..........              (0.1)                                               (0.1)          (4.8)
Issuance of shares for board
   compensation ..........................               0.8                                                 0.8           30.1
Treasury stock acquired ..................                                                     (11.8)      (11.8)        (414.8)

Comprehensive income:
   Net income ............................                        733.9                                    733.9

Other comprehensive income, net of tax:
   Net unrealized gains (losses) .........                                      971.7                      971.7
   Net accumulated gains (losses)
     on cash flow hedges .................                                       72.2                       72.2
   Foreign currency translation
     adjustment ..........................                                      109.5                      109.5
   Minimum pension liability .............                                        4.9                        4.9
                                                                                                        --------
Comprehensive income .....................                                                               1,892.2
                                           -------------------------------------------------------------------------------------

Balance at September 30, 2003 ............   $3.2   $5,153.6   $2,347.9      $1,681.5      $(1,069.0)   $8,117.2      289,277.6
                                           =====================================================================================
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                        7
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                            Nine Months Ended
                                                                                              September 30,
                                                                                           2003          2002
                                                                                         -----------------------
                                                                                               (in millions)
<S>                                                                                      <C>          <C>
Cash flows from operating activities:
   Net income .........................................................................  $    733.9   $    402.9
   Adjustments to reconcile net income to net cash provided by operating activities:
     Amortization of discount - fixed maturities ......................................       (24.4)       (89.6)
     Net realized investment and other (gains) losses .................................       (94.1)       255.4
     Change in deferred policy acquisition costs ......................................      (320.4)      (216.2)
     Depreciation and amortization ....................................................        44.1         47.5
     Net cash flows from trading securities ...........................................      (101.5)        47.5
     Increase in accrued investment income ............................................      (156.7)       (74.7)
     Increase in premiums and accounts receivable .....................................       (53.1)       (83.5)
     Increase in other assets and other liabilities, net ..............................      (166.9)       (35.9)
     Increase in policy liabilities and accruals, net .................................     1,716.2      1,551.8
     Increase in income taxes .........................................................       166.0         77.3
                                                                                         ----------   ----------

       Net cash provided by operating activities ......................................     1,743.1      1,882.5

Cash flows from investing activities:
   Sales of:
     Fixed maturities available-for-sale ..............................................     9,481.7      3,706.3
     Equity securities available-for-sale .............................................       257.2        328.4
     Real estate ......................................................................        97.5         70.2
     Short-term investments and other invested assets .................................       162.6         89.8
     Home Office properties ...........................................................       887.6           --
   Maturities, prepayments and scheduled redemptions of:
     Fixed maturities held-to-maturity ................................................       190.9        131.1
     Fixed maturities available-for-sale ..............................................     2,902.5      2,281.6
     Short-term investments and other invested assets .................................       816.9        369.7
     Mortgage loans on real estate ....................................................       976.6        990.9
   Purchases of:
     Fixed maturities held-to-maturity ................................................       (77.3)       (11.8)
     Fixed maturities available-for-sale ..............................................   (16,235.3)   (10,506.7)
     Equity securities available-for-sale .............................................      (260.6)      (153.7)
     Real estate ......................................................................       (32.7)       (14.3)
     Short-term investments and other invested assets .................................    (1,305.9)      (750.7)
   Mortgage loans on real estate issued ...............................................    (1,522.2)    (1,655.5)
   Net cash paid related to acquisition of businesses .................................        (3.8)          --
   Other, net .........................................................................      (167.3)        32.4
                                                                                         ----------   ----------

       Net cash used in investing activities ..........................................  $ (3,831.6)  $ (5,092.3)
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                        8
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

         UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)

<TABLE>
<CAPTION>
                                                                                  Nine Months Ended
                                                                                     September 30,
                                                                                2003              2002
                                                                               ------------------------
                                                                                   (in millions)
<S>                                                                            <C>           <C>
Cash flows from financing activities:
   Acquisition of treasury stock ...........................................   $    (11.8)   $   (371.5)
   Universal life and investment-type contract deposits ....................      7,077.9       7,474.9
   Universal life and investment-type contract maturities and withdrawals ..     (5,304.0)     (4,287.3)
   Issuance of consumer notes ..............................................        769.4            --
   Issuance of short-term debt .............................................        148.4          69.0
   Repayment of long-term debt .............................................         (4.6)        (47.9)
   Repayment of short-term debt ............................................       (127.9)        (18.0)
   Net (decrease)increase in commercial paper ..............................        (59.5)        144.8
                                                                               ----------    ----------

       Net cash provided by financing activities ...........................      2,487.9       2,964.0
                                                                               ----------    ----------

       Net increase (decrease) in cash and cash equivalents ................        399.4        (245.8)

       Cash and cash equivalents at beginning of period ....................      1,190.6       1,313.7
                                                                               ----------    ----------

       Cash and cash equivalents at end of period ..........................   $  1,590.0    $  1,067.9
                                                                               ==========    ==========
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.


                                        9
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Note 1 -- Summary of Significant Accounting Policies

Business

John Hancock Financial Services, Inc. (the Company) is a diversified financial
services organization that provides a broad range of insurance and investment
products and investment management and advisory services. As outlined in Note 11
- Significant Event, the Company has entered into a merger agreement with
Manulife Financial Corporation (Manulife) which is expected to close early in
the second quarter of 2004, pending necessary regulatory and shareholder
approvals.

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, these unaudited consolidated financial statements contain all
adjustments, consisting of only normal and recurring adjustments, necessary for
a fair presentation of the Company's financial position and results of
operations. Operating results for the three and nine month periods ended
September 30, 2003 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2003. These unaudited consolidated
financial statements should be read in conjunction with the Company's annual
audited financial statements as of December 31, 2002 included in the Company's
Form 10-K for the year ended December 31, 2002 filed with the United States
Securities and Exchange Commission (hereafter referred to as the Company's 2002
Form 10-K). The Company's financial statements, news releases, quarterly
financial supplements and other information are available on the internet at
www.jhancock.com, under the link labeled "Investor Relations." In addition, all
of the Company's United States Securities and Exchange Commission filings are
available on the internet at www.sec.gov, under the name Hancock John Financial.

The balance sheet at December 31, 2002, presented herein, has been derived from
the audited financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements.

Certain prior year amounts have been reclassified to conform to the current year
presentation.

The acquisitions described under the table below were recorded under the
purchase method of accounting and, accordingly, the operating results have been
included in the Company's consolidated results of operations from the dates of
acquisition. The purchase prices were allocated to the assets acquired and the
liabilities assumed based on estimated fair values, with the excess of the
applicable purchase prices over the estimated fair values, if any, recorded as
goodwill. These acquisitions were made by the Company in execution of its plan
to acquire businesses that have strategic value, meet its earnings requirements
and advance the growth of its current businesses.

The disposal described under the table below was conducted in order to execute
the Company's strategy to focus resources on businesses in which it can have a
leadership position. The table below presents actual and proforma data, for
comparative purposes, of revenue, net income and earnings per share for the
periods indicated, to demonstrate the proforma effect of the acquisitions and of
the disposal as if they occurred on January 1, 2002.

<TABLE>
<CAPTION>
                                   Three Months Ended September 30,                Nine Months Ended September 30,
                              2003                   2002                    2003                    2002
                            Proforma     2003      Proforma     2002       Proforma      2003      Proforma       2002
                          ---------------------------------------------------------------------------------------------
                                                           (in millions, except per share data)

<S>                       <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Revenue ...............   $ 2,430.1   $ 2,430.1   $ 2,175.6   $ 2,142.9   $ 7,237.6   $ 7,204.2   $ 6,484.8   $ 6,391.1

Net income ............       190.8       190.8       160.5       158.1       735.6       733.9       411.4       402.9

Earnings per share ....        0.66        0.66        0.55        0.54        2.55        2.54        1.40        1.37
</TABLE>


                                       10
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 1 -- Summary of Significant Accounting Policies - (Continued)

Acquisitions:

On July 8, 2003, The Maritime Life Assurance Company (Maritime Life), a majority
owned Canadian subsidiary of the Company, completed its purchase of the
insurance business of Liberty Health, a Canadian division of US-based Liberty
Mutual Insurance Company, through a reinsurance agreement for approximately
$97.5 million. Through the agreement, Maritime Life assumed the entire business
of Liberty Health, including its group life, group disability and group health
divisions, as well as its individual health insurance business. The agreement is
subject to certain contingencies currently being negotiated that will impact the
ultimate determination of goodwill and value of business acquired intangible
assets. There was no impact on the Company's results of operations from the
acquired insurance business during 2002 or the first six months of 2003.

On December 31, 2002, the Company acquired the fixed universal life insurance
business of Allmerica Financial Corporation (Allmerica) through a reinsurance
agreement for approximately $104.3 million. There was no impact on the Company's
results of operations from the acquired insurance business during 2002.

Disposal:

On June 19, 2003, the Company agreed to sell its group life insurance business
through a reinsurance agreement with Metropolitan Life Insurance Company, Inc
(MetLife). The Company is ceding all activity after May 1, 2003 to MetLife. The
transaction was recorded as of May 1, 2003, and closed November 4, 2003.

Stock-Based Compensation

The Company has two stock-based compensation plans, which are described more
fully in the Company's 2002 Form 10-K. For the periods covered by this report,
the Company applies the recognition and measurement provisions of Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations in accounting for stock-based
compensation grants made prior to January 1, 2003. No compensation expense is
reflected in net income for stock option grants to employees and non-employee
board members of the Company made prior to January 1, 2003. All options granted
under those plans had an exercise price equal to the market value of the
Company's common stock on the date of grant. Prior to January 1, 2003, the
Company recognized compensation expense at the time of the grant or over the
vesting period for grants of non-vested stock to employees and non-employee
board members and grants of stock options to non-employee general agents and has
continued this practice. The Company adopted the fair value provisions of
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," as of January 1, 2003 and is utilizing the transition
provisions described in SFAS No. 148, on a prospective basis to awards granted
after December 31, 2002. Adoption of the fair value provisions of SFAS No. 123
will have a material impact on the Company's net income. The Company has adopted
the disclosure provisions of SFAS No. 148. The following table illustrates the
pro forma effect on net income and earnings per share if the Company had applied
the fair value recognition provisions of SFAS No. 123, to all stock-based
employee compensation.


                                       11
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 1 -- Summary of Significant Accounting Policies - (Continued)

<TABLE>
<CAPTION>
                                                                Three Months Ended    Nine Months Ended
                                                                  September 30,         September 30,
                                                               2003           2002   2003           2002
                                                               -------------------   --------------------
                                                                  (in millions, except per share data)
<S>                                                            <C>         <C>       <C>         <C>
Net income, as reported ....................................   $ 190.8     $ 158.1   $ 733.9     $ 402.9
Add: Stock-based employee compensation expense included
   in reported net income, net of related tax effects ......       3.4         1.3      18.0         4.6
Deduct: Total stock-based employee compensation expense
   determined under fair value method for all awards, net
   of related tax effects ..................................       9.7        14.1      39.1        43.6
                                                               -------     -------   -------     -------
Proforma net income ........................................   $ 184.5     $ 145.3   $ 712.8     $ 363.9
                                                               =======     =======   =======     =======
Earnings per share
Basic:
      As reported ..........................................   $  0.66     $  0.55   $  2.55     $  1.38
      Proforma .............................................      0.64        0.50      2.48        1.24
Diluted:
      As reported ..........................................      0.66        0.54      2.54        1.37
      Proforma .............................................      0.64        0.50      2.47        1.23
</TABLE>

Recent Accounting Pronouncements

Statement of Position 03-1 - Accounting and Reporting by Insurance Enterprises
for Certain Nontraditional Long Duration Contracts and for Separate Accounts

On July 7, 2003, the Accounting Standards Executive Committee (AcSEC) of the
American Institute of Certified Public Accountants (AICPA) issued Statement of
Position 03-1, "Accounting and Reporting by Insurance Enterprises for Certain
Nontraditional Long Duration Contracts and for Separate Accounts" (SOP 03-1).
SOP 03-1 provides guidance on a number of topics unique to insurance
enterprises, including separate account presentation, interest in separate
accounts, gains and losses on the transfer of assets from the general account to
a separate account, liability valuation, returns based on a contractually
referenced pool of assets or index, accounting for contracts that contain death
or other insurance benefit features, accounting for reinsurance and other
similar contracts, accounting for annuitization benefits, and sales inducements
to contract holders.

SOP 03-1 will be effective for the Company's financial statements on January 1,
2004. The Company is currently evaluating the impact of adopting SOP 03-1 on its
consolidated financial position, results of operations and cash flows.

Statement of Financial Accounting Standards No. 150 - Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity

In May 2003, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity" (SFAS No. 150).
SFAS No. 150 changes the accounting for certain financial instruments that,
under previous guidance, issuers could account for as equity. It requires that
certain financial instruments be classified as liabilities on issuer balance
sheets, including those instruments that are issued in shares and are
mandatorily redeemable, those instruments that are not issued in shares but give
the issuer an obligation to repurchase previously issued equity shares, and
certain financial instruments that give the issuer the option of settling an
obligation by issuing more equity shares. The adoption of SFAS No. 150 had no
impact on the Company's consolidated financial position, results of operations
or cash flows.

SFAS No. 149 - Amendment of Statement No. 133 on Derivative Instruments and
Hedging Activities

In April 2003, the FASB issued Statement of Financial Accounting Standards No.
149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities" (SFAS No. 149). SFAS No. 149 amends and clarifies financial
accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging


                                       12
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 1 -- Summary of Significant Accounting Policies - (Continued)

activities under Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133).
In particular, SFAS No. 149 clarifies under what circumstances a contract with
an initial net investment meets the characteristic of a derivative, clarifies
when a derivative contains a financing component, amends the definition of an
underlying to conform it to language used in FASB Interpretation No.
45--"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others" and amends certain
other existing pronouncements. SFAS No. 149 was effective for contracts entered
into or modified after June 30, 2003 and for hedging relationships designated
after June 30, 2003. The adoption of SFAS No. 149 had no impact on the Company's
consolidated financial position, results of operations or cash flows.

FASB Derivative Implementation Group Issue No. 36--Embedded Derivatives:
Bifurcation of a Debt Instrument that Incorporates Both Interest Rate Risk and
Credit Rate Risk Exposures that are Unrelated or Only Partially Related to the
Creditworthiness of the Issuer of that Instrument

In April 2003, the FASB's Derivative Implementation Group (DIG) released SFAS
No. 133 Implementation Issue No. 36, "Embedded Derivatives: Bifurcation of a
Debt Instrument that Incorporates Both Interest Rate Risk and Credit Rate Risk
Exposures that are Unrelated or Only Partially Related to the Creditworthiness
of the Issuer of that Instrument" (DIG B36). DIG B36 addresses whether SFAS No.
133 requires bifurcation of a debt instrument into a debt host contract and an
embedded derivative if the debt instrument incorporates both interest rate risk
and credit risk exposures that are unrelated or only partially related to the
creditworthiness of the issuer of that instrument. Under DIG B36, modified
coinsurance and coinsurance with funds withheld reinsurance agreements as well
as other types of receivables and payables where interest is determined by
reference to a pool of fixed maturity assets or a total return debt index are
examples of arrangements containing embedded derivatives requiring bifurcation.
The effective date of the implementation guidance is October 1, 2003.

On October 1, 2003, the Company adopted DIG B36 and has determined that certain
of its reinsurance receivables/payables and insurance products contain embedded
derivatives requiring bifurcation, specifically in modified coinsurance
agreements and in participating pension contracts. The adoption of DIG B36, with
respect to the Company's modified coinsurance agreements, decreased net income
with a cumulative effect of accounting charge of $10.6 million (net of tax of
$5.7 million) as of October 1, 2003. The Company is in the process of
determining the impact of the adoption of DIG B36 on its participating pension
contracts. Although permitted by DIG B36, no reclassification of securities from
the held-to-maturity or available-for-sale categories to the trading category
was made.

FASB Interpretation 46 - Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 5, as deferred by FASB Staff Position No. FIN 46-6

In January 2003, the FASB issued Interpretation 46, "Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51," (FIN 46) which attempts to
clarify the consolidation accounting guidance in Accounting Research Bulletin
No. 51, "Consolidated Financial Statements," (ARB No. 51) as it applies to
certain entities in which equity investors which do not have the characteristics
of a controlling financial interest, or do not have sufficient equity at risk
for the entities to finance their activities without additional subordinated
financial support from other parties. Such entities are known as variable
interest entities (VIEs).

Controlling financial interests of a VIE are identified by the exposure of a
party to a majority of either the VIE's expected losses or its residual rewards,
or both. Such parties are primary beneficiaries of the VIEs and FIN 46 requires
that the primary beneficiary of a VIE consolidate the VIE. FIN 46 also requires
new disclosures for significant relationships with VIEs, whether or not
consolidation accounting is either used or anticipated.

Additional liabilities recognized as a result of consolidating VIEs with which
the Company is involved would not represent additional claims on the general
assets of the Company; rather, they would represent claims against additional
assets recognized by the Company as a result of consolidating the VIEs.
Conversely, additional assets recognized as a result of consolidating these VIEs
would not represent additional assets which the Company could use to satisfy
claims against its general assets, rather they would be used only to settle the
additional liabilities recognized as a result of consolidating these VIEs.


                                       13
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 1 -- Summary of Significant Accounting Policies - (Continued)

However, in accordance with FIN 46, it is possible that if the Company
consolidates some of these VIEs, the Company may, as a result, report lower
consolidated net income and resulting lower consolidated shareholder's equity in
the short or intermediate term even though the Company's shareholders do not
have direct economic exposure to the additional VIE losses recognized. These
losses would ultimately reverse when the Company's status as primary beneficiary
lapses. Refer to Note 3 - Relationships with Variable Interest Entities below,
and Note 1- Summary of Significant Accounting Policies in the Company's 2002
Form 10-K for a more complete discussion of the Company's relationships with
VIEs, their assets and liabilities, and the Company's maximum exposure to loss
as a result of its involvement with them.

In October 2003, the FASB directed the FASB staff to issue FASB Staff Position
No. FIN 46-6 (FSP FIN 46-6). FSP FIN 46-6 defers the effective date of FIN 46
for interests held by public entities in VIEs or potential VIEs dating from
before February 1, 2003. The consolidation requirements of FIN 46 for these
interests are now scheduled to be effective on December 31, 2003. The
consolidation requirements of FIN 46 remain applicable to VIEs created after
January 31, 2003 and to VIEs in which an enterprise obtains an interest after
that date. The Company has not entered into primary beneficiary relationships
with any VIEs since January 31, 2003.

The Company will adopt FIN 46 on December 31, 2003. The Company will apply the
provisions of FIN 46 prospectively, and is currently estimating the impact on
its consolidated financial position, results of operations and cash flows of
consolidating those VIEs for which the Company is the primary beneficiary.

SFAS No. 148 - Accounting for Stock-Based Compensation--Transition and
Disclosure, an amendment of FASB Statement No. 123

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123." SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation which is an optional alternative method of accounting presented in
SFAS No. 123, "Accounting for Stock Based Compensation." In addition, SFAS No.
148 amends the disclosure requirements of SFAS No. 123 to require more prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. SFAS No. 148's amendment of the transition and annual
disclosure provisions of SFAS No. 123 is effective for fiscal years ending after
December 2002. The Company adopted the fair value provisions of SFAS No. 123 on
January 1, 2003 and utilized the transition provisions described in SFAS No.
148, on a prospective basis to awards granted after December 31, 2002. In the
first nine months of 2003 the Company granted 638,000 stock options to senior
management and recorded $0.9 million, net of tax of $0.4 million, of related
compensation expense. The Company has adopted the disclosure provisions of SFAS
No. 148, see Note 1--Summary of Significant Accounting Policies, Stock-Based
Compensation above.

For the periods prior to January 1, 2003, Accounting Principles Board Opinion
(APB) No. 25, "Accounting for Stock Issued to Employees" was applied. APB No. 25
provides guidance on how to account for the issuance of stock and stock options
to employees. The Company adopted APB No. 25 upon its demutualization and IPO
effective February 1, 2000. Compensation cost for stock options, if any, is
measured as the excess of the quoted market price of the Company's stock at the
date of grant over the amount an employee must pay to acquire the stock.
Compensation cost is recognized over the requisite vesting periods based on
market value on the date of grant. APB No. 25 was amended by SFAS No. 123 to
require pro forma disclosures of net income and earnings per share as if a "fair
value" based method was used.

FASB Interpretation No. 45 - Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" (FIN 45). FIN 45 requires certain types of guarantees to
be recorded by the guarantor as liabilities at fair value. This differs from
previous practice, which generally required recognition of a


                                       14
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 1 -- Summary of Significant Accounting Policies - (Continued)

liability only when a potential loss was deemed to be probable and was
reasonably estimable in amount. FIN 45 does not apply to guarantees that are
accounted for under existing insurance accounting principles. FIN 45 requires
more extensive disclosures of certain other types of guarantees, including
certain categories of guarantees which are already accounted for under
specialized accounting principles, such as SFAS No. 133, even when the
likelihood of making any payments under the guarantee is remote.

Disclosure requirements are effective for financial statements for interim or
annual periods ending after December 31, 2002. Refer to Note 1 - Summary of
Significant Accounting Policies and Note 11 - Commitment, Guarantees and
Contingencies in the Company's 2002 Form 10-K for additional discussion and
disclosure of FIN 45. Initial recognition and initial measurement provisions are
applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The adoption of FIN 45 had no impact on the Company's
consolidated financial position, results of operations or cash flows.

SFAS No. 146 - Accounting for Costs Associated with Exit or Disposal Activities

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 requires recognition of a
liability for exit or disposal costs, including restructuring costs, when the
liability is incurred rather than at the date of an entity's commitment to a
formal plan of action. SFAS No. 146 applies to one-time termination benefits
provided to current employees that are involuntarily terminated under the terms
of a one-time benefit arrangement. An ongoing benefit arrangement is presumed to
exist if a company has a past practice of providing similar benefits. SFAS No.
146 is effective for exit or disposal activities that are initiated after
December 31, 2002. The adoption of SFAS No. 146 had no impact on the Company's
consolidated financial position, results of operations or cash flows.


                                       15
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 2 -- Segment Information

In the first quarter of 2003, the Company implemented organizational changes
within the Corporate and Other Segment which resulted in the break-out of the
Maritime Life business as its own operating segment and the reclassification of
2002 results for the Federal long-term care insurance business to the Protection
Segment. The Maritime Life Segment consists of our consolidated Canadian
operations, principally those of our Canadian life insurance business, The
Maritime Life Assurance Company (Maritime Life). The following discussion
presents the results of our segments on a basis consistent with the new
organization structure. The reclassifications associated with the realignment of
our operating segments had no impact on segment after-tax operating income, or
net income of the Maritime Life, or Corporate and Other Segments, other than to
display these businesses separately. The reclassification associated with the
Federal long-term care insurance business has no impact on segment after-tax
operating income, or net income of the business. The reclassification increased
Protection Segment after-tax operating income and decreased Corporate and Other
Segment after-tax operating income by $0.2 million and $0.5 million for the
three and nine month periods ended September 30, 2002.

The Company operates in the following six business segments: two segments
primarily serve domestic retail customers, two segments serve primarily domestic
institutional customers, one segment serves primarily Canadian retail and group
customers and our sixth segment is the Corporate and Other Segment, which
includes our remaining international operations, the corporate account and
run-off from several discontinued business lines. Our retail segments are the
Protection Segment and the Asset Gathering Segment. Our institutional segments
are the Guaranteed and Structured Financial Products (G&SFP) Segment and the
Investment Management Segment. Our Maritime Life Segment consists primarily of
the financial results of our Canadian operating subsidiary, Maritime Life. For
additional information about the Company's business segments, please refer to
the Company's 2002 Form 10-K.

The following table summarizes selected financial information by segment for the
periods and dates indicated, and reconciles segment revenues and segment
after-tax operating income to amounts reported in the unaudited consolidated
statements of income. Included in the Protection Segment for all periods
presented are the assets, liabilities, revenues and expenses of the closed
block. For additional information on the closed block see Note 5 - Closed Block
in the notes to the unaudited consolidated financial statements and the related
footnote in the Company's 2002 Form 10-K.

Amounts reported as segment adjustments in the tables below primarily relate to:

      (i)   certain net realized investment and other gains (losses), net of
            related amortization adjustment for deferred policy acquisition
            costs, amounts credited to participating pension contractholder
            accounts and policyholder dividend obligation (the adjustment for
            net realized investment and other gains (losses) excludes gains and
            losses from mortgage securitizations because management views the
            related gains and losses as an integral part of the core business of
            those operations),

      (ii)  restructuring costs related to reducing staff in the home office and
            terminating certain operations outside the home office in 2002, cost
            of this nature are not reported as a segment adjustment for 2003,
            and

      (iii) the benefits to policyholders and expenses incurred relating to the
            settlement of a class action lawsuit against the Company involving a
            dispute regarding disclosure of costs on various modes of life
            insurance policy premium payment.


                                       16
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 2 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                             Asset                 Investment    Maritime   Corporate
                                             Protection    Gathering     G&SFP     Management      Life     and Other  Consolidated
                                             --------------------------------------------------------------------------------------
                                                                                 (in millions)
<S>                                           <C>          <C>          <C>          <C>        <C>          <C>         <C>
As of or for the three months ended
September 30, 2003
Revenues:
   Revenues from external customers .......   $   607.7    $   131.7    $   125.5    $   24.7   $   377.7    $  182.0    $  1,449.3
   Net investment income ..................       357.8        179.2        403.5         2.7        96.1        (0.8)      1,038.5
   Inter-segment revenues .................          --          0.3           --         4.5          --        (4.8)           --
                                             --------------------------------------------------------------------------------------
   Segment revenues .......................       965.5        311.2        529.0        31.9       473.8       176.4       2,487.8
   Net realized investment and other
     gains (losses), net ..................        (3.7)       (11.4)       (44.4)         --         3.8        (2.0)        (57.7)
                                             --------------------------------------------------------------------------------------
   Revenues ...............................   $   961.8    $   299.8    $   484.6    $   31.9   $   477.6    $  174.4       2,430.1
                                             ======================================================================================
Net Income:
   Segment after-tax operating income .....   $    86.6    $    49.5    $    70.3    $    5.6   $    23.1    $   (8.1)   $    227.0
   Net realized investment and other
     gains (losses), net ..................        (2.5)        (7.2)       (26.7)         --         4.2        (4.0)        (36.2)
                                             --------------------------------------------------------------------------------------
   Net income .............................   $    84.1    $    42.3    $    43.6    $    5.6   $    27.3    $  (12.1)   $    190.8
                                             ======================================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method ...   $     5.5    $     2.9    $     8.9          --          --    $   14.1    $     31.4
   Carrying value of investments
     accounted for under the equity
     method ...............................       313.5        215.5        565.0    $   14.0          --       730.7       1,838.7
   Amortization of deferred policy
     acquisition costs, excluding
     amounts related to net realized
     investment and other gains
     (losses) .............................        38.3         25.4          0.5          --   $    (1.6)        2.2          64.8
   Segment assets .........................    34,420.3     18,473.8     36,476.5     2,654.4    13,241.6     3,602.3     108,868.9
</TABLE>


                                       17
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 2 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                            Asset                 Investment    Maritime    Corporate
                                             Protection   Gathering     G&SFP     Management      Life      and Other   Consolidated
                                             ---------------------------------------------------------------------------------------
                                                                                (in millions)
<S>                                          <C>          <C>          <C>         <C>          <C>          <C>          <C>
As of or for the three months ended
September 30, 2002
Revenues:
   Revenues from external customers ......   $   569.3    $   136.6    $    47.7   $    21.6    $   228.4    $   202.3    $ 1,205.9
   Net investment income .................       334.1        147.9        431.0         3.3         78.9        (26.6)       968.6
   Inter-segment revenues ................          --          0.8           --         5.6           --         (6.4)          --
                                             --------------------------------------------------------------------------------------
   Segment revenues ......................       903.4        285.3        478.7        30.5        307.3        169.3      2,174.5
   Net realized investment and other
     gains (losses), net .................       (18.8)        52.6        (74.6)         --          6.0          3.2        (31.6)
                                             --------------------------------------------------------------------------------------
   Revenues ..............................   $   884.6    $   337.9    $   404.1   $    30.5    $   313.3    $   172.5    $ 2,142.9
                                             ======================================================================================
Net Income:
   Segment after-tax operating income ....   $    67.5    $    14.6    $    75.9   $     4.5    $    24.5    $    (1.2)   $   185.8
   Net realized investment and other
     gains (losses), net .................       (11.5)        34.5        (47.4)       (0.1)        (1.2)         2.0        (23.7)
   Restructuring charges .................        (0.6)        (3.1)          --          --           --         (0.3)        (4.0)
                                             --------------------------------------------------------------------------------------
   Net income ............................   $    55.4    $    46.0    $    28.5   $     4.4    $    23.3    $     0.5    $   158.1
                                             ======================================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method ..   $     2.9    $     0.8    $     5.9   $    (0.1)          --    $    (2.4)   $     7.1
   Carrying value of investments
     accounted for under the equity
     method ..............................       190.2        120.6        351.6        11.8           --        682.5      1,356.7
   Amortization of deferred policy
     acquisition costs, excluding
     amounts related to net realized
     investment and other gains
     (losses) ............................        71.7         66.9          0.5          --    $    11.0          1.0        151.1
   Segment assets ........................    29,642.4     15,350.0     33,300.0     2,258.0     10,265.2      3,319.8     94,135.4
</TABLE>


                                       18
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 2 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                             Asset                  Investment    Maritime   Corporate
                                             Protection    Gathering       G&SFP    Management      Life     and Other  Consolidated
                                             --------------------------------------------------------------------------------------
                                                                                  (in millions)
<S>                                          <C>           <C>          <C>          <C>        <C>          <C>         <C>
As of or for the nine months ended
September 30, 2003
Revenues:
   Revenues from external customers ......   $  1,765.5    $   406.4    $   251.8    $   74.6   $    943.2   $  560.4    $  4,001.9
   Net investment income .................      1,059.5        522.1      1,251.1        14.4        276.5       (6.5)      3,117.1
   Inter-segment revenues ................           --          0.9           --        18.6           --      (19.5)           --
                                             --------------------------------------------------------------------------------------
   Segment revenues ......................      2,825.0        929.4      1,502.9       107.6      1,219.7      534.4        7119.0
   Net realized investment and other
     gains (losses), net .................         (7.5)       (28.9)      (170.6)         --         11.8      280.4          85.2
                                             --------------------------------------------------------------------------------------
   Revenues ..............................   $  2,817.5    $   900.5    $ 1,332.3    $  107.6   $  1,231.5   $  814.8    $  7,204.2
                                             ======================================================================================
Net Income:
   Segment after-tax operating income ....   $    250.1    $   140.7    $   237.0    $   22.7   $     62.7   $  (36.0)   $    677.2
   Net realized investment and other
     gains (losses), net .................         (5.0)       (18.5)      (105.7)         --          9.7      176.2          56.7
                                             --------------------------------------------------------------------------------------
   Net income ............................   $    245.1    $   122.2    $   131.3    $   22.7   $     72.4   $  140.2    $    733.9
                                             ======================================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method ..   $     16.5    $     8.1    $    28.6    $    3.9           --   $   16.0    $     73.1
   Carrying value of investments
     accounted for under the equity
     method ..............................        313.5        215.5        565.0        14.0           --      730.7       1,838.7
   Amortization of deferred policy
     acquisition costs, excluding
     amounts related to net realized
     investment and other gains
     (losses) ............................        128.8         78.4          1.6          --   $      5.5        3.9         218.2
   Segment assets ........................     34,420.3     18,473.8     36,476.5    $2,654.4     13,241.6    3,602.3     108,868.9
</TABLE>


                                       19
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 2 -- Segment Information - (Continued)

<TABLE>
<CAPTION>
                                                             Asset                 Investment    Maritime    Corporate
                                              Protection   Gathering     G&SFP     Management      Life      and Other  Consolidated
                                              -------------------------------------------------------------------------------------
                                                                                 (in millions)
<S>                                           <C>          <C>          <C>          <C>         <C>         <C>          <C>
As of or for the nine months ended
September 30, 2002
Revenues:
   Revenues from external customers .......   $ 1,654.0    $   433.9    $   314.2    $   61.4    $   673.1   $   594.2    $ 3,730.8
   Net investment income ..................       987.0        418.9      1,283.6        10.9        234.3       (17.1)     2,917.6
   Inter-segment revenues .................          --          0.8           --        22.1           --       (22.9)          --
                                              -------------------------------------------------------------------------------------
   Segment revenues .......................     2,641.0        853.6      1,597.8        94.4        907.4       554.2      6,648.4
   Net realized investment and other
     gains (losses), net ..................       (76.2)         8.2       (182.9)        0.6         (7.3)        0.3       (257.3)
                                              -------------------------------------------------------------------------------------
   Revenues ...............................   $ 2,564.8    $   861.8    $ 1,414.9    $   95.0    $   900.1   $   554.5    $ 6,391.1
                                              =====================================================================================
Net Income:
   Segment after-tax operating income .....   $   217.3    $    95.2    $   218.7    $   16.8    $    56.5   $    (2.4)   $   602.1
   Net realized investment and other
     gains (losses), net ..................       (48.5)         6.5       (116.8)        0.4        (12.4)       (0.1)      (170.9)
   Class action lawsuit ...................       (18.7)          --           --          --           --        (0.8)       (19.5)
   Restructuring charges ..................        (4.7)        (5.0)        (0.5)       (0.2)        (0.4)        2.0         (8.8)
                                              -------------------------------------------------------------------------------------
   Net income .............................   $   145.4    $    96.7    $   101.4    $   17.0    $    43.7   $    (1.3)   $   402.9
                                              =====================================================================================
Supplemental Information:
   Equity in net income of investees
     accounted for by the equity method ...   $    12.4    $     5.9    $    24.7          --           --   $     9.4    $    52.4
   Carrying value of investments
     accounted for under the equity
     method ...............................       190.2        120.6        351.6    $   11.8           --       682.5      1,356.7
   Amortization of deferred policy
     acquisition costs, excluding
     amounts related to net realized
     investment and other gains
     (losses) .............................       149.5        117.3          1.6          --    $    28.9         2.6        299.9
   Segment assets .........................    29,642.4     15,350.0     33,300.0     2,258.0     10,265.2     3,319.8     94,135.4
</TABLE>


                                       20
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 3 -- Relationships with Variable Interest Entities

The Company has relationships with various types of special purpose entities
(SPEs) and other entities, some of which are variable interest entities (VIEs)
in accordance with FASB Interpretation No. 46--"Consolidation of Variable
Interest Entities, an interpretation of ARB No. 51" (FIN 46), as discussed in
Note 1 -- Summary of Significant Accounting Policies above. FIN 46's effective
date has been deferred until December 31, 2003 by the FASB for relationships
with VIEs, provided those relationships existed before February 1, 2003. The
Company has not entered into primary beneficiary relationships with any VIEs
after January 31, 2003. Presented below are discussions of the Company's
significant relationships with, and certain summarized financial information for
entities which may be viewed as VIEs.

As explained in Note 1 -- Summary of Significant Accounting Policies above,
additional liabilities recognized as a result of consolidating VIEs with which
the Company is involved would not represent additional claims on the general
assets of the Company; rather, they would represent claims against additional
assets recognized by the Company as a result of consolidating the VIEs. These
additional liabilities are non-recourse to the general assets of the Company.
However, in accordance with FIN 46, it is possible that if the Company
consolidates some of these VIEs on December 31, 2003, the Company may, as a
result, report lower consolidated net income and resulting lower consolidated
shareholders' equity in the short or intermediate term even though the Company's
shareholders do not have direct economic exposure to the additional losses
recognized. These losses would ultimately reverse when the Company's status as
primary beneficiary of each consolidated VIE lapses.

Conversely, additional assets recognized as a result of consolidating these VIEs
would not represent additional assets which the Company could use to satisfy
claims against its general assets, rather they could be used only to settle
additional liabilities recognized as a result of consolidating the VIEs.

Collateralized Debt Obligations (CDOs) The Company acts as investment advisor to
certain asset backed investment vehicles, commonly known as collateralized debt
obligations (CDOs). The Company also invests directly in the debt and/or equity
of some of these CDOs, and in the debt and/or equity of CDOs managed by others.
CDOs raise capital by issuing debt and equity securities, and use their capital
to invest in portfolios of interest bearing securities. The returns from a CDO's
portfolio of investments are used by the CDO to finance its operations including
paying interest on its debt and paying investment advisory fees and other
expenses. Any net income or net loss is shared by the CDO's equity owners and,
in certain circumstances where we manage the CDO, positive investment experience
is shared by the Company through variable performance management fees. Any net
losses of the CDO are borne first by the equity owners to the extent of their
investments, and then by debt owners in ascending order of subordination, or in
cases where the CDO attracts investors through guaranteed insurance company
separate accounts, the net losses are borne by the issuer of separate account
insurance policies. See Note 1 -- Summary of Significant Accounting Policies in
the Company's 2002 10K for a discussion of separate account accounting.

If a CDO does not have sufficient controlling equity capital to finance its
expected losses at its origination, as calculated in accordance with FIN 46, the
CDO is defined as a VIE for purposes of determining the appropriate
consolidation criteria. While all CDOs are not VIEs, in accordance with FIN 46,
where the Company is the primary beneficiary of the CDO, and the CDO is a VIE,
the Company will be required to consolidate the financial statements of the CDO
into its own financial statements as of December 31, 2003.

In accordance with previously existing consolidation accounting principles, the
Company currently consolidates a CDO only when the Company owns a majority of
the CDO's equity, and will continue this practice for CDOs which are not deemed
to be VIEs. The Company has not yet finalized its determination of whether each
CDO should be considered a VIE, or if each is a VIE, whether the Company would
be the primary beneficiary of each.

Owners of debt or equity securities issued by CDOs advised by the Company have
no recourse to the Company's assets in the event of default by the CDO, unless
the Company has guaranteed such securities directly for investors through its
separate accounts. The Company's risk of loss from any CDO it manages, or in
which it invests, is limited to its investment in the CDO, if any, and
guarantees it made, if any. All of these guarantees are accounted for under
existing insurance industry accounting principles. The guaranteed assets are
currently recorded on the Company's consolidated balance sheets, at their fair
value, as separate account assets, with offsetting separate account liabilities.
The Company believes it is reasonably possible that it may consolidate one or
more of the CDOs which it manages, or will be required to disclose information
about them, or both, as of December 31, 2003, as a result of adopting FIN 46.
The tables below present summary financial data for CDOs which the Company
manages, and data relating to the Company's maximum exposure to loss as a result
of its relationships with them. The Company has determined that it is not the
primary beneficiary of any CDO in which it invests but does not manage and thus
will


                                       21
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 3 -- Relationships with Variable Interest Entities - (Continued)

not be required to consolidate any of them and is not disclosing any of their
summary financial data or its exposure to them. Credit ratings are provided by
credit rating agencies, and relate to the debt issued by the CDOs in which the
Company has invested or guaranteed.

                                                    September 30,  December 31,
                                                       2003           2002
                                                    --------------------------
                                                          (in millions)
Total size of Company-Managed CDOs

Total assets ..................................     $5,522.9          $6,089.2
                                                    ========          ========

Total debt ....................................     $3,950.3          $3,574.1

Total other liabilities .......................      1,561.8           2,432.7
                                                    --------          --------
Total liabilities .............................      5,512.1           6,006.8
Total equity ..................................         10.8              82.4
                                                    --------          --------

Total liabilities and equity ..................     $5,552.9          $6,089.2
                                                    ========          ========

<TABLE>
<CAPTION>
Maximum exposure of the Company to losses                 September 30,     December 31,
From Company-Managed CDOs                                     2003             2002
                                                        ----------------------------------
                                                          (in millions, except percents)
<S>                                                     <C>        <C>     <C>        <C>
Investment in tranches of Company managed CDOs, by
credit rating (Moody's/Standard & Poors):
Aaa/AAA .............................................   $186.8     32.7%   $380.2     53.8%
Aa/AA ...............................................     81.6     14.3        --       --
A/A .................................................       --       --      14.5      2.1
Baa/BBB .............................................    217.6     38.0     218.0     30.9
Ba/BB ...............................................      7.3      1.3       7.0      1.0
B/B- ................................................       --       --       6.0      0.9
Caa/CCC .............................................     12.2      2.1        --       --
Not rated (equity) ..................................     66.5     11.6      79.8     11.3
                                                        ------   ------    ------   ------
Total Company exposure ..............................   $572.0    100.0%   $705.5    100.0%
                                                        ======   ======    ======   ======
</TABLE>

The Company has determined that each of its relationships with any CDO which it
does not manage is not significant, and has therefore not included information
related to CDOs which it does not manage above.

Tax-Credit Housing Properties (the Properties) Since 1995, the Company has
received federal income tax benefits by investing in limited partnerships and
limited liability companies (the Properties) which own apartment properties that
qualify for low income housing and/or historic tax credits. The Company receives
Federal income tax credits and deductible losses in recognition of its
investments in each of the Properties for a period of ten years. In some cases,
the Company receives distributions from the Properties which are based on a
portion of the actual cash flows.

The Company invests in the Properties indirectly and, in some cases, directly.
The indirect investments are via investment funds (the Funds) which in turn
invest in Properties while the direct investments represent limited partnership
interests in other Properties. The Company also, in some cases, invests in
mortgages secured by the real estate holdings owned by these Properties. All of
the Funds but none of the Properties are currently consolidated into the
Company's financial statements in accordance with previously existing
consolidation accounting principles. The Properties are organized as limited
partnerships or limited liability companies. Each Property has a managing
general partner or managing member. The Company, directly or via


                                       22
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 3 -- Relationships with Variable Interest Entities - (Continued)

the Funds, is usually the sole limited partner or investor member in each
Property, but it is not the general partner or managing member of any Property.
The Company is the sole limited partner and also the general partner of each
Fund. The Funds have no borrowings.

The Properties typically obtain additional financial support by issuing
long-term debt in the form of mortgages secured by their real estate holdings,
or as unsecured debt. None of the debt has any recourse to the general assets of
the Company or of the Funds. The Company provides mortgages to some of the
properties. In the event of default by a Property on a mortgage, the mortgage is
subject to foreclosure and only the real estate holdings of the Property would
be available to satisfy the claims of the Property's lenders. No Property with
which the Company has been involved has undergone a mortgage foreclosure.
Conversely, the assets of the Properties are not available to satisfy claims
against the general assets of the Company. The Company currently uses the equity
method of accounting for its investments in the Properties. The isolation of the
assets and the liabilities of the Properties from the claimants and assets of
the Company, respectively, would continue in the event the Company commenced
consolidation accounting for any of the Properties.

The Company's maximum exposure to loss in relation to the Properties is limited
to its investment in the debt or equity of the Properties and any outstanding
equity and mortgage commitments.

The Company has determined that the Properties are VIEs in accordance with FIN
46 and that the Company is not the primary beneficiary of any of them. The
Company believes its relationships with the Properties, taken as a group, are
significant because of the VIE nature of the Properties, the size of the group,
and the relatively high proportionate Company ownership of each Property's
equity. The tables below present summary financial data for the Properties, and
data relating to the Company's maximum exposure to loss as a result of these
relationships.

<TABLE>
<CAPTION>
                                                                   September 30,   December 31,
                                                                       2003           2002
                                                                   ---------------------------
                                                                         (in millions)
<S>                                                                  <C>              <C>
Total size of the Properties (1)

Total assets ...................................................     $941.9           $682.2
                                                                     ======           ======

Total debt .....................................................     $557.1           $396.4

Total other liabilities ........................................      118.0            101.8
                                                                     ------           ------
Total liabilities ..............................................      675.1            498.2
Total equity ...................................................      266.8            184.0
                                                                     ------           ------

Total liabilities and equity ...................................     $941.9           $682.2
                                                                     ======           ======
</TABLE>

(1)   Certain data is reported with up to a one-year delay, due to the delayed
      availability of audited financial statements of the Properties.

<TABLE>
<CAPTION>
                                                                   September 30,   December 31,
                                                                       2003           2002
                                                                   ---------------------------
                                                                         (in millions)
<S>                                                                   <C>             <C>
Maximum exposure of the Company to losses from the Properties

Equity investment in the Properties (1).........................      $240.2          $177.0
Outstanding equity capital commitments to the Properties .......       112.7           139.4
Carrying value of mortgages for the Properties .................        63.0            65.2
Outstanding mortgage commitments to the Properties .............         5.1             5.1
                                                                      ------          ------

Total Company exposure .........................................      $421.0          $386.7
                                                                      ======          ======

(1)   Certain data is reported with up to a one-year delay, due to the delayed
      availability of audited financial statements of the Properties.

</TABLE>


                                       23
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 3 -- Relationships with Variable Interest Entities - (Continued)

Other Entities The Company has a number of relationships with a disparate group
of entities (Other Entities), which result from the Company's direct investment
in the equity and/or debt of the Other Entities. Two are energy production,
distribution and marketing companies organized as limited partnerships, two are
investment funds organized as limited partnerships, and three are operating
companies organized as C-corps (a ski resort developer/operator, a step-van
manufacturer and a steel spring manufacturing company). Subsequent to the
Company's investment in their debt, each of the operating companies underwent
corporate reorganizations.

The Company is evaluating whether each of these entities is a VIE, and if so,
whether the Company is the primary beneficiary of each, but considers it
reasonably possible that it may consolidate each of these entities or be
required to disclose information about them, as a result of adopting FIN 46. The
Company has made no guarantees to any other parties involved with these
entities, and has outstanding capital commitments to both of the investment
funds. The Company's maximum exposure to loss as a result of its relationships
with these entities is limited to its investment in them and its outstanding
capital commitment.

The tables below present summary financial data for these Other Entities, and
data relating to the Company's maximum exposure to loss as a result of its
relationships with them.

                                                    September 30,  December 31,
                                                       2003           2002
                                                    ---------------------------
                                                          (in millions)
Total size of Other Entities (1)

Total assets ...................................    $297.2              $291.7
                                                    ======              ======

Total debt .....................................    $311.5               309.3
Total other liabilities ........................      66.2                61.9
                                                    ------              ------
Total liabilities ..............................     377.7               371.2
Total equity (2) ...............................     (80.5)              (79.5)
                                                    ------              ------

Total liabilities and equity ...................    $297.2              $291.7
                                                    ======              ======

      (1)   Certain data is reported with up to a six-month delay, due to the
            delayed availability of audited financial statements of the
            properties.
      (2)   The negative equity results primarily from the inclusion of the ski
            resort operator mentioned above in the table. The entity has an
            accumulated deficit from operations, but is current on its debt
            service and is cash flow positive. The total equity shown above has
            not been adjusted to remove the portion attributable to other
            shareholders, or adjusted to reflect unrealized appreciation on the
            ski resort operator's real property.

<TABLE>
<CAPTION>
                                                                September 30,   December 31,
                                                                   2003            2002
                                                                ----------------------------
                                                                       (in millions)
<S>                                                             <C>                  <C>
Maximum exposure of the Company to losses from
Other Entities (1)

Combined equity and debt investments in the Other Entities ..   $191.2               $171.0

Outstanding capital commitment ..............................     53.7                 44.2
                                                                ------               ------
Total Company exposure ......................................   $244.9               $215.2
                                                                ======               ======
</TABLE>

(1)   The Company's maximum exposure to loss is limited to its investments of
      debt securities of these entities which are carried at fair value, and
      equity securities of these entities which are valued using the equity
      method of accounting, and outstanding capital commitments to the
      investment funds.


                                       24
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 4 -- Contingencies

Harris Trust

Since 1983, the Company has been involved in complex litigation known as Harris
Trust and Savings Bank, as Trustee of Sperry Master Retirement Trust No. 2 v.
John Hancock Mutual Life Insurance Company (S.D.N.Y. Civ. 83-5491). After
successive appeals to the Second Circuit and to the U.S. Supreme Court, the case
was remanded to the District Court and tried by a Federal District Court judge
in 1997. The judge issued an opinion in November 2000.

In that opinion the Court found against the Company and awarded the Trust
approximately $13.8 million in relation to this claim together with unspecified
additional pre-judgment interest on this amount from October 1988. The Court
also found against the Company on issues of liability valuation and ERISA law.
Damages in the amount of approximately $5.7 million, together with unspecified
pre-judgment interest from December 1996, were awarded on these issues. As part
of the relief, the judge ordered the removal of Hancock as a fiduciary to the
plan. On April 11, 2001, the Court entered a judgment against the Company for
approximately $84.9 million, which includes damages to the plaintiff,
pre-judgment interest, attorney's fees and other costs.

On May 14, 2001 the Company filed an appeal in this case. On August 20, 2002,
the Second Circuit Court of Appeals issued a ruling, affirming in part,
reversing in part, and vacating in part the District Court's judgment in this
case. The Second Circuit Court of Appeals' opinion overturned substantial
portions of the District Court's opinion, representing the vast majority of the
lower court's award of damages and fees, and sent the matter back to the
District Court for further proceedings. The matter remains in litigation, and no
final judgment has been entered.

The parties recently reached an agreement in principle with respect to
settlement of this matter. The amount of the proposed settlement has been taken
into account in reserves established in this and in previous quarters.

If the proposed settlement is not finalized and the litigation is not otherwise
settled, notwithstanding what the Company believes to be the merits of its
position in this case, if unsuccessful, the Company's ultimate liability,
including fees, costs and interest could have a material adverse impact on net
income. However, the Company does not believe that any such liability would be
material in relation to its financial position or liquidity.

Reinsurance Recoverable

On February 28, 1997, the Company sold a major portion of its group insurance
business to UNICARE Life & Health Insurance Company (UNICARE), a wholly owned
subsidiary of WellPoint Health Networks, Inc. The business sold included the
Company's group accident and health business and related group life business and
Cost Care, Inc., Hancock Association Services Group and Tri-State, Inc., all of
which were indirect wholly-owned subsidiaries of the Company. The Company
retained its group long-term care operations. The insurance business sold was
transferred to UNICARE through a 100% coinsurance agreement. The Company remains
liable to its policyholders to the extent that UNICARE does not meet its
contractual obligations under the coinsurance agreement.

Through the Company's group health insurance operations, the Company entered
into a number of reinsurance arrangements in respect of personal accident
insurance and the occupational accident component of workers compensation
insurance, a portion of which was originated through a pool managed by Unicover
Managers, Inc. Under these arrangements, the Company both assumed risks as a
reinsurer, and also passed 95% of these risks on to other companies. This
business had originally been reinsured by a number of different companies, and
has become the subject of widespread disputes. The disputes concern the
placement of the business with reinsurers and recovery of the reinsurance. The
Company is engaged in disputes, including a number of legal proceedings, in
respect of this business. The risk to the Company is that other companies that
reinsured the business from the Company may seek to avoid their reinsurance
obligations. However, the Company believes that it has a reasonable legal
position in this matter. During the fourth quarter of 1999 and early 2000, the
Company received additional information about its exposure to losses under the
various reinsurance programs. As a result of this additional information and in
connection with global settlement discussions initiated in late 1999 with other
parties involved in the reinsurance programs, during the fourth quarter of 1999
the Company recognized a charge for uncollectible reinsurance of $133.7 million,
after tax, as


                                       25
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 4 -- Contingencies - (Continued)

its best estimate of its remaining loss exposure. The Company believes that any
exposure to loss from this issue, in addition to amounts already provided for as
of September 30, 2003, would not be material.

Reinsurance ceded contracts do not relieve the Company from its obligations to
policyholders. The Company remains liable to its policyholders for the portion
reinsured to the extent that any reinsurer does not meet its obligations for
reinsurance ceded to it under the reinsurance agreements. Failure of the
reinsurers to honor their obligations could result in losses to the Company;
consequently, estimates are established for amounts deemed or estimated to be
uncollectible. To minimize its exposure to significant losses from reinsurance
insolvencies, the Company evaluates the financial condition of its reinsurers
and monitors concentration of credit risk arising from similar characteristics
of the reinsurers.

Other Matters

In the normal course of its business operations, the Company is involved with
litigation from time to time with claimants, beneficiaries and others, and a
number of litigation matters were pending as of September 30, 2003. It is the
opinion of management, after consultation with counsel, that the ultimate
liability with respect to these claims, if any, will not materially affect the
financial position, results of operations or liquidity of the Company.


                                       26
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 5 -- Closed Block

In connection with the Company's plan of reorganization for its demutualization
and initial public offering, the Company created a closed block for the benefit
of policies included therein. Additional information regarding the creation of
the closed block and relevant accounting issues is contained in the notes to
consolidated financial statements of the Company's 2002 Form 10-K. The following
table sets forth certain summarized financial information relating to the closed
block as of the dates indicated.

<TABLE>
<CAPTION>
                                                                              September 30,
                                                                                  2003         December 31,
                                                                               (unaudited)        2002
                                                                             -----------------------------
                                                                                     (in millions)
<S>                                                                          <C>                 <C>
Liabilities
Future policy benefits ...................................................   $10,635.5           $10,509.0
Policyholder dividend obligation .........................................       446.6               288.9
Policyholders' funds .....................................................     1,508.5             1,504.0
Policyholder dividends payable ...........................................       440.7               432.3
Other closed block liabilities ...........................................       100.2               111.7
                                                                             -----------------------------
   Total closed block liabilities ........................................   $13,131.5           $12,845.9
                                                                             -----------------------------

Assets
Investments
Fixed maturities:
   Held-to-maturity--at amortized cost
     (fair value: September 30--$72.6; December 31--$97.1) ...............   $    68.9           $    86.0
   Available-for-sale--at fair value
     (cost: September 30--$5,844.8; December 31--$5,580.2) ...............     6,294.5             5,823.2
Equity securities:
   Available-for-sale--at fair value
     (cost: September 30--$10.1; December 31--$10.5) .....................        10.8                12.4
Mortgage loans on real estate ............................................     1,618.2             1,665.8
Real estate ..............................................................        12.5                  --
Policy loans .............................................................     1,550.9             1,555.1
Short term investments ...................................................          --                25.2
Other invested assets ....................................................       269.8               212.4
                                                                             -----------------------------
   Total investments .....................................................     9,825.6             9,380.1

Cash and cash equivalents ................................................       163.7               244.0
Accrued investment income ................................................       152.4               156.3
Other closed block assets ................................................       323.8               327.6
                                                                             -----------------------------
   Total closed block assets .............................................   $10,465.5           $10,108.0
                                                                             -----------------------------

Excess of reported closed block liabilities over assets
   designated to the closed block ........................................   $ 2,666.0           $ 2,737.9
                                                                             -----------------------------

Portion of above representing other comprehensive income:
   Unrealized appreciation (depreciation), net of tax of $(157.4)
     million and $(84.0) million at September 30 and December 31,
     respectively ........................................................       292.4               155.9
   Allocated to the policyholder dividend obligation, net of tax of
     $159.1 million and $88.8 million at  September 30 and December 31,
     respectively ........................................................      (295.6)             (164.9)
                                                                             -----------------------------
       Total .............................................................        (3.2)               (9.0)
                                                                             -----------------------------

Maximum future earnings to be recognized from closed block
   assets and liabilities ................................................   $ 2,662.8           $ 2,728.9
                                                                             =============================
</TABLE>


                                       27
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 5 -- Closed Block - (Continued)

<TABLE>
<CAPTION>
                                                     September 30,
                                                        2003          December 31,
                                                     (unaudited)         2002
                                                     ----------------------------
                                                             (in millions)
<S>                                                    <C>              <C>
Change in the policyholder dividend obligation:
   Balance at beginning of period ................     $288.9           $251.2
     Impact on net income before income taxes ....      (43.3)           (70.8)
     Unrealized investment gains (losses) ........      201.0            108.5
                                                     ----------------------------

   Balance at end of period ......................     $446.6           $288.9
                                                     ============================
</TABLE>

The following table sets forth certain summarized financial information relating
to the closed block for the periods indicated:

<TABLE>
<CAPTION>
                                                                                Three Months Ended       Nine Months Ended
                                                                                 September 30,             September 30,
                                                                                 2003         2002       2003        2002
                                                                               --------------------------------------------
                                                                                                (in millions)
<S>                                                                            <C>         <C>         <C>         <C>
Revenues
   Premiums ................................................................   $  221.4    $  236.1    $  664.6    $  704.1
   Net investment income ...................................................      161.2       166.2       487.5       499.4
   Net realized investment and other gains (losses), net of amounts
     credited to the policyholder dividend obligation of $(22.5) million
     and $21.9 million for the three months ended September 30, 2003 and
     2002, respectively and $(33.7) million and $19.3 million
     for the nine months ended September 30, 2003 and 2002, respectively ...       (1.1)       (1.2)       (3.4)       (3.9)
   Other closed block revenues .............................................       (0.3)        0.1        (0.2)        0.1
                                                                               --------------------------------------------
     Total closed block revenues ...........................................      381.2       401.2     1,148.5     1,199.7

Benefits and Expenses
   Benefits to policyholders ...............................................      237.2       252.7       713.1       762.2
   Change in the policyholder dividend obligation ..........................       (2.6)       (7.7)      (11.3)      (43.4)
   Other closed block operating costs and expenses .........................       (0.5)       (1.7)       (4.9)       (3.9)
   Dividends to policyholders ..............................................      113.8       121.1       351.7       374.6
                                                                               --------------------------------------------
     Total benefits and expenses ...........................................      347.9       364.4     1,048.6     1,089.5
                                                                               --------------------------------------------

   Closed block revenues, net of closed block benefits and expenses,
     before income taxes ...................................................       33.3        36.8        99.9       110.2
   Income taxes, net of amounts credited to the policyholder
     dividend obligation of $0.5 million and $(0.3) million for the three
     months ended September 30, 2003 and 2002, respectively and $1.6
     million and $(3.4) million for the nine months ended September 30,
     2003 and 2002, respectively ...........................................       12.0        12.5        35.3        37.5
                                                                               --------------------------------------------

   Closed block revenues, net of closed block benefits and expenses,
     and income taxes ......................................................   $   21.3    $   24.3    $   64.6    $   72.7
                                                                               ============================================
</TABLE>


                                       28
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 6 -- Severance

During the three and nine month periods ended September 30, 2003, the Company
continued its ongoing Competitive Position Project (the project). This project
was initiated in the first quarter of 1999 to reduce costs and increase future
operating efficiency by consolidating portions of the Company's operations and
is expected to continue through at least 2003. The project consists primarily of
reducing staff in the home office and terminating certain operations outside the
home office.

Since the inception of the project as well as from similar initiatives such as
our information technology outsourcing and the sale of the home office
properties, approximately 1,590 employees have been terminated. Benefits paid
since the inception of the project were $108.9 million through September 30,
2003. As of September 30, 2003 and December 31, 2002, the liability for employee
termination costs, included in other liabilities was $11.6 million and $12.4
million, respectively. Employee termination costs, net of related pension
curtailment and other post employment benefit related gains, are included in
other operating costs and expenses and were $0.6 million and $6.6 million for
the three months ended September 30, 2003 and 2002 and $10.0 million and $15.6
million for the nine month periods ended September 30, 2003 and 2002,
respectively. The total employee termination costs for the nine month period
ended September 30, 2003 included an estimated $5.0 million for planned
terminations related to our information technology outsourcing and other
terminations.

Note 7 -- Sale/Lease Back Transactions and Other Lease Obligations

On March 14, 2003, the Company sold three of its Home Office complex properties
to Beacon Capital Partners for $910.0 million. As part of the transaction, the
Company entered into a long-term lease of the space it now occupies in those
buildings and plans on continuing to use them as its corporate headquarters. As
a result of the sales-leaseback transaction, the Company recognized a current
realized gain of $233.8 million and a deferred profit of $247.7 million. A
capital lease obligation of $90.0 million was recorded for one of the
properties, which has a 15 year lease term. The other two properties have
operating leases which range from 5 to 12 years. The Company also provided
Beacon Capital Partners with a long-term sublease on the Company's parking
garage.

The future minimum lease payments by year and in the aggregate, under the
capital lease and under non-cancelable operating leases related to those three
properties sold under a sales-leaseback transaction and future sublease rental
income, consisted of the following for 2003:

<TABLE>
<CAPTION>
                                                                Non-cancelable   Income from
                                                  Capital         Operating       Operating
                                                   Leases           Leases          Lease
                                                  -----------------------------------------
                                                                 (in millions)
<S>                                               <C>               <C>              <C>
2003 ..........................................   $  6.9            $ 34.7           $  1.3
2004 ..........................................      8.3              40.0              1.3
2005 ..........................................      8.0              38.9              1.3
2006 ..........................................      7.7              38.1              1.3
2007 ..........................................      7.4              37.2              1.3
Thereafter ....................................     54.5             131.7             78.5
                                                  ------            ------           ------
Total minimum payment .........................     92.8            $320.6           $ 85.0
                                                                    ======           ======
Amounts representing interest .................     (4.1)
                                                  ------
Present value of net minimum lease payments ...     88.7

Current portion of capital lease obligations ..     (3.0)
                                                  ------
Total .........................................   $ 85.7
                                                  ======
</TABLE>


                                       29
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 8 -- Related Party Transactions

Certain directors of the Company are members or directors of other entities that
periodically perform services for or have other transactions with the Company.
Such transactions are either subject to bidding procedures or are otherwise
entered into on terms comparable to those that would be available to unrelated
third parties and are not material to the Company's results of operations,
financial condition or liquidity.

The Company provides certain administrative and asset management services to its
employee benefit plans (the Plans). Fees paid to the Company by the Plans for
these services were $1.7 million and $2.3 million for the three months ended
September 30, 2003 and 2002, respectively, and $4.7 million and $6.2 million for
the nine months ended September 30, 2003 and 2002, respectively.

Note 9 -- Goodwill and Other Intangible Assets

The carrying values of the Company's goodwill and other purchased intangible
assets are presented in the table below as of the dates presented. These assets
are included in other assets in the unaudited consolidated balance sheets.
Additional information about the Company's purchased intangible assets is
provided in the notes to the consolidated financial statements in the Company's
2002 10-K.

                                                 September 30,     December 31,
                                                     2003             2002
                                                 ------------------------------
                                                         (in millions)
Goodwill....................................       $ 278.7           $ 254.6

Management contracts........................           6.3               5.2

Value of business acquired..................         503.7             481.7


                                       30
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of John
           Hancock Variable Life Insurance Company

The following condensed consolidating financial statements are provided in
compliance with Regulation S-X of the United States Securities and Exchange
Commission (the "Commission") and in accordance with Rule 12h-5 of the
Commission.

John Hancock Variable Life Insurance Company (the Variable Company) is an
indirect wholly-owned subsidiary of JHFS. The Variable Company sells deferred
annuity contracts, which feature a market value adjustment and are registered
with the Commission. At September 30, 2003, JHFS provides a full and
unconditional guarantee of the Variable Company's obligation to pay amounts due
to contractholders on surrender, withdrawal or annuitization of the Variable
Company's deferred annuity contracts' market value adjustment interest. In
addition, JHFS guarantees the Variable Company's future issues of deferred
annuity contracts with such market value adjustments.

JHFS is an insurance holding company. The assets of JHFS consist primarily of
the outstanding capital stock of the Life Company, John Hancock Canadian
Holdings Limited and investments in other international subsidiaries. JHFS' cash
flow primarily consists of dividends from its operating subsidiaries and
proceeds from debt offerings offset by expenses, shareholder dividends and stock
repurchases. As a holding company, the Company's ability to meet its cash
requirements, including, but not limited to, paying interest on any debt, paying
expenses related to its affairs, paying dividends on its common stock and any
Board of Directors approved repurchase of its common stock, substantially
depends upon dividends from its operating subsidiaries.

State insurance laws generally restrict the ability of insurance companies to
pay cash dividends in excess of prescribed limitations without prior approval.
The Life Company's limit is the greater of 10% of its statutory surplus or the
prior calendar year's statutory net gain from operations of the Life Company.
The ability of the Life Company, JHFS' primary operating subsidiary, to pay
shareholder dividends is and will continue to be subject to restrictions set
forth in the insurance laws and regulations of Massachusetts, its domiciliary
state. The Massachusetts insurance law limits how and when the Life Company can
pay shareholder dividends. The Life Company, in the future, could also be viewed
as being commercially domiciled in New York. If so, dividend payments may also
be subject to New York's holding company act as well as Massachusetts law. JHFS
currently does not expect such regulatory requirements to impair its ability to
meet its liquidity and capital needs. However, JHFS can give no assurance it
will declare or pay dividends on a regular basis.

Canadian insurance laws generally restrict the ability of Canadian insurance
companies to pay cash dividends in excess of prescribed limitations without
prior approval. Maritime Life, our Canadian life insurance subsidiary, is
subject to restrictions on dividend payments to its holding company, John
Hancock Canadian Holdings, Limited, by Canadian regulators. Maritime Life may
not make dividend payments which would make its minimum continuing capital and
surplus ratio fall below 150%, as required by the Office of the Superintendent
of Financial Institutions. Maritime Life's minimum continuing capital and
surplus ratio is measured annually, and was 192% as of December 31, 2002.


                                       31
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (Continued)

                      Condensed Consolidating Balance Sheet

<TABLE>
<CAPTION>
                                                              John Hancock
                                            John Hancock     Variable Life                                           Consolidated
                                              Financial        Insurance                                             John Hancock
                                              Services          Company            Other                              Financial
September 30, 2003                           (Guarantor)        (Issuer)       Subsidiaries        Eliminations      Services, Inc.
-----------------------------------------------------------------------------------------------------------------------------------
                                                                               (in millions)

<S>                                         <C>                <C>                <C>                <C>                 <C>
Assets:
  Invested assets .......................           --         $  4,743.5         $ 68,281.3         $    537.8          $ 73,562.6
  Cash and cash equivalents .............   $     15.6                7.0            1,558.9                8.5             1,590.0
  Investment in unconsolidated
    subsidiaries ........................      8,882.8              122.0                 --           (9,004.8)                 --
  Other assets ..........................         35.5            1,566.3            9,564.0             (122.9)           11,042.9
  Separate account assets ...............           --            6,436.2           16,237.2                 --            22,673.4
                                            ---------------------------------------------------------------------------------------
Total Assets ............................   $  8,933.9         $ 12,875.0         $ 95,641.4         $ (8,581.4)         $108,868.9
                                            =======================================================================================

Liabilities:
  Insurance liabilities .................           --         $  4,558.5         $ 64,301.1         $    440.6          $ 69,300.2
  Consumer notes ........................           --                 --            1,059.6                 --             1,059.6
  Debt ..................................   $    783.9               36.0            1,110.2             (131.0)            1,799.1
  Other liabilities .....................         32.8              621.8            5,112.6               (8.2)            5,759.0
  Separate account liabilities ..........           --            6,436.2           16,237.2                 --            22,673.4
                                            ---------------------------------------------------------------------------------------
Total Liabilities .......................        816.7           11,652.5           87,820.7              301.4           100,591.3

  Preferred shareholders' equity in
    subsidiary companies ................           --                 --              160.4                 --               160.4
                                            ---------------------------------------------------------------------------------------
  Shareholders' equity (1) ..............      8,117.2            1,222.5            7,660.3           (8,882.8)            8,117.2
                                            ---------------------------------------------------------------------------------------
Total Liabilities, Preferred
Shareholders' Equity in Subsidiary
Companies and Shareholders' Equity (1) ..   $  8,933.9         $ 12,875.0         $ 95,641.4         $ (8,581.4)         $108,868.9
                                            =======================================================================================
</TABLE>


                                       32
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (Continued)

                      Condensed Consolidating Balance Sheet

<TABLE>
<CAPTION>
                                                              John Hancock
                                            John Hancock     Variable Life                                          Consolidated
                                              Financial        Insurance                                            John Hancock
                                              Services          Company             Other                             Financial
December 31, 2002                            (Guarantor)        (Issuer)         Subsidiaries       Eliminations     Services, Inc.
----------------------------------------------------------------------------------------------------------------------------------
                                                                                 (in millions)

<S>                                         <C>               <C>               <C>                 <C>                  <C>
Assets:
  Invested assets .......................          --         $ 3,703.0         $61,693.4           $   541.1            $65,937.5
  Cash and cash equivalents .............   $    14.6             200.7             973.1                 2.2              1,190.6
  Investment in unconsolidated
    subsidiaries ........................     7,003.7             112.2                --            (7,115.9)                  --
  Other assets ..........................        25.7           1,485.9           8,444.0               (46.9)             9,908.7
  Separate account assets ...............          --           5,883.7          14,943.6                  --             20,827.3
                                            --------------------------------------------------------------------------------------
Total Assets ............................   $ 7,044.0         $11,385.5         $86,054.1           $(6,619.5)           $97,864.1
                                            ======================================================================================
Liabilities:
  Insurance liabilities .................          --         $ 3,888.8         $60,057.9           $   451.8            $64,398.5
  Consumer notes ........................          --                --             290.2                  --                290.2
  Debt ..................................   $   813.2                --           1,051.0               (65.0)             1,799.2
  Other liabilities .....................        19.7             524.1           3,633.9                (2.6)             4,175.1
  Separate account liabilities ..........          --           5,883.7          14,943.6                  --             20,827.3
                                            --------------------------------------------------------------------------------------
Total Liabilities .......................       832.9          10,296.6          79,976.6               384.2             91,490.3

  Preferred shareholders' equity in
    subsidiary companies ................          --                --             162.7                  --                162.7
  Shareholders' equity (1) ..............     6,211.1           1,088.9           5,914.8            (7,003.7)             6,211.1
                                            --------------------------------------------------------------------------------------
Total Liabilities, Preferred
Shareholders' Equity in Subsidiary
Companies and Shareholders' Equity (1) ..   $ 7,044.0         $11,385.5         $86,054.1           $(6,619.5)           $97,864.1
                                            ======================================================================================
</TABLE>

(1)   Shareholder's equity includes common stock of JHFS at $.01 par value per
      share, 2.0 billion shares authorized, 319.3 million and 317.5 million
      shares issued as of September 30, 2003 and December 31, 2002,
      respectively, and JHFS treasury stock at cost of $1,069.0 million, or 30.0
      million shares, and $1,057.2 million, or 29.5 million shares, as of
      September 30, 2003 and December 31, 2002, respectively.


                                       33
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (Continued)

                   Condensed Consolidating Statement of Income

<TABLE>
<CAPTION>
                                                           John Hancock
                                         John Hancock     Variable Life                                        Consolidated
                                           Financial        Insurance                                          John Hancock
For the Three Month Period Ended           Services          Company          Other                              Financial
September 30, 2003                        (Guarantor)        (Issuer)      Subsidiaries        Eliminations   Services, Inc.
----------------------------------------------------------------------------------------------------------------------------
                                                                          (in millions)

<S>                                      <C>               <C>               <C>               <C>                  <C>
Revenues
  Premiums ...........................         --          $   14.6          $1,019.4          $    0.3             $1,034.3
  Universal life and investment-
    type product fees ................         --              86.4             123.0               0.1                209.5
  Net investment income ..............         --              71.0             959.1               8.4              1,038.5
  Net realized investment and other
    gains (losses) ...................         --             (10.5)            (40.6)             (7.2)               (58.3)
  Investment management
    revenues, commissions and
    other fees .......................         --                --             138.9                --                138.9
  Other revenue ......................         --               0.1              67.2              (0.1)                67.2
                                         -----------------------------------------------------------------------------------
Total revenues .......................         --             161.6           2,267.0               1.5              2,430.1

Benefits and expenses
  Benefits to policyholders ..........         --              86.8           1,430.9               5.2              1,522.9
  Other operating costs and
    expenses .........................   $   (1.1)             21.1             418.7               0.5                439.2
  Amortization of deferred policy
    acquisition costs ................         --               2.8              62.0                --                 64.8
  Dividends to policyholders .........         --               4.3             156.6               0.1                161.0
                                         -----------------------------------------------------------------------------------
Total benefits and expenses ..........       (1.1)            115.0           2,068.2               5.8              2,187.9

  Income before income taxes .........        1.1              46.6             198.8              (4.3)               242.2
  Income taxes .......................       (1.3)             15.7              38.7              (1.7)                51.4
                                         -----------------------------------------------------------------------------------
    Net income after taxes ...........        2.4              30.9             160.1              (2.6)               190.8

  Equity in the net income of
    unconsolidated subsidiaries ......      188.4              (2.6)               --            (185.8)                  --
                                         -----------------------------------------------------------------------------------

Net income ...........................   $  190.8          $   28.3          $  160.1          $ (188.4)            $  190.8
                                         ===================================================================================
</TABLE>


                                       34
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (Continued)

                   Condensed Consolidating Statement of Income

<TABLE>
<CAPTION>
                                                            John Hancock
                                          John Hancock     Variable Life                                             Consolidated
                                           Financial         Insurance                                               John Hancock
For the Three Month Period Ended            Services          Company             Other                                Financial
September 30, 2002                        (Guarantor)         (Issuer)         Subsidiaries          Eliminations   Services, Inc.
----------------------------------------------------------------------------------------------------------------------------------
                                                                         (in millions)

<S>                                        <C>               <C>                  <C>                <C>                  <C>
Revenues
  Premiums .............................         --          $   12.4             $  794.0           $    0.3             $  806.7
  Universal life and investment-
    type product fees ..................         --              94.6                117.9                0.2                212.7
  Net investment income ................   $    0.1              58.9                900.4                9.2                968.6
  Net realized investment and other
    gains (losses) .....................         --              (4.6)               (29.8)               3.7                (30.7)
  Investment management
    revenues, commissions and
    other fees .........................         --                --                129.3                 --                129.3
  Other revenue $ ......................         --                --                 56.3                 --                 56.3
                                           ---------------------------------------------------------------------------------------
Total revenues .........................        0.1             161.3              1,968.1               13.4              2,142.9

Benefits and expenses
  Benefits to policyholders ............         --              79.4              1,217.6                6.4              1,303.4
  Other operating costs and
    expenses ...........................       15.2              18.8                298.9                0.4                333.3
  Amortization of deferred policy
    acquisition costs ..................         --              48.7                102.3                0.1                151.1
  Dividends to policyholders ...........         --               4.4                139.2                 --                143.6
                                           ---------------------------------------------------------------------------------------
Total benefits and expenses ............       15.2             151.3              1,758.0                6.9              1,931.4

  Income (loss) before income taxes ....      (15.1)             10.0                210.1                6.5                211.5
  Income taxes .........................       (6.8)              5.0                 53.2                2.0                 53.4
                                           ---------------------------------------------------------------------------------------
    Net income (loss) after taxes ......       (8.3)              5.0                156.9                4.5                158.1

  Equity in the net income of
    unconsolidated subsidiaries ........      166.4               4.5                   --             (170.9)                  --
                                           ---------------------------------------------------------------------------------------

Net income .............................   $  158.1          $    9.5             $  156.9           $ (166.4)            $  158.1
                                           =======================================================================================
</TABLE>


                                       35
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (Continued)

                   Condensed Consolidating Statement of Income

<TABLE>
<CAPTION>
                                                          John Hancock
                                          John Hancock   Variable Life                                     Consolidated
                                            Financial      Insurance                                       John Hancock
For the Nine Month Period Ended             Services        Company           Other                        Financial
September  30, 2003                        (Guarantor)      (Issuer)      Subsidiaries    Eliminations    Services, Inc.
-------------------------------------------------------------------------------------------------------------------------

<S>                                      <C>               <C>               <C>              <C>               <C>
Revenues
  Premiums ...........................         --          $   45.4          $2,737.3         $   (0.3)         $2,782.4
  Universal life and investment-
    type product fees ................         --             259.2             358.1              0.5             617.8
  Net investment income ..............   $    0.1             203.5           2,887.6             25.9           3,117.1
  Net realized investment and other
    gains (losses) ...................         --             (14.3)            112.5             (4.1)             94.1
  Investment management
    revenues, commissions and
    other fees .......................         --                --             393.0               --             393.0
  Other revenue ......................         --               0.1             199.7               --             199.8
                                         -------------------------------------------------------------------------------
Total revenues .......................        0.1             493.9           6,688.2             22.0           7,204.2

Benefits and expenses
  Benefits to policyholders ..........         --             253.5           4,005.0             15.8           4,274.3
  Other operating costs and
    expenses .........................       32.5              66.2           1,153.9              1.3           1,253.9
  Amortization of deferred policy
    acquisition costs ................         --              46.3             171.8              0.1             218.2
  Dividends to policyholders .........         --              12.8             430.8               --             443.6
                                         -------------------------------------------------------------------------------
Total benefits and expenses ..........       32.5             378.8           5,761.5             17.2           6,190.0

  Income (loss) before income taxes ..      (32.4)            115.1             926.7              4.8           1,014.2
  Income taxes .......................      (15.0)             38.8             255.1              1.4             280.3
                                         -------------------------------------------------------------------------------
    Net income (loss) after taxes ....      (17.4)             76.3             671.6              3.4             733.9

  Equity in the net income of
    unconsolidated subsidiaries ......      751.3               3.4                --           (754.7)               --
                                         -------------------------------------------------------------------------------

Net income ...........................   $  733.9          $   79.7          $  671.6         $ (751.3)         $  733.9
                                         ===============================================================================
</TABLE>


                                       36
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (Continued)

                   Condensed Consolidating Statement of Income

<TABLE>
<CAPTION>
                                                         John Hancock
                                          John Hancock  Variable Life
                                           Financial      Insurance                                           Consolidated John
For the Nine Month Period Ended             Services       Company             Other                          Hancock Financial
September 30, 2002                         (Guarantor)     (Issuer)         Subsidiaries    Eliminations       Services, Inc.
-----------------------------------------------------------------------------------------------------------------------------------
                                                                           (in millions)

<S>                                       <C>               <C>               <C>               <C>                  <C>
Revenues
  Premiums ............................         --          $   40.9          $2,472.3          $   (0.5)            $2,512.7
  Universal life and investment-
    type product fees .................         --             268.5             344.4               0.6                613.5
  Net investment income ...............   $    0.7             168.8           2,721.6              26.5              2,917.6
  Net realized investment and other
    gains (losses) ....................         --             (20.9)           (239.1)              4.6               (255.4)
  Investment management
    revenues, commissions and
    other fees ........................         --                --             419.7                --                419.7
  Other revenue .......................        0.1               1.2             181.6               0.1                183.0
                                          -----------------------------------------------------------------------------------
Total revenues ........................        0.8             458.5           5,900.5              31.3              6,391.1

Benefits and expenses
  Benefits to policyholders ...........         --             249.3           3,735.0              17.9              4,002.2
  Other operating costs and
    expenses ..........................       43.5              45.1           1,027.1               0.9              1,116.6
  Amortization of deferred policy
    acquisition costs .................         --              64.5             235.3               0.1                299.9
  Dividends to policyholders ..........         --              14.2             424.1                --                438.3
                                          -----------------------------------------------------------------------------------
Total benefits and expenses ...........       43.5             373.1           5,421.5              18.9              5,857.0

  Income (loss) before income taxes ...      (42.7)             85.4             479.0              12.4                534.1
  Income taxes ........................      (19.7)             28.8             118.3               3.8                131.2
                                          -----------------------------------------------------------------------------------
    Net income (loss) after taxes .....      (23.0)             56.6             360.7               8.6                402.9

  Equity in the net income of
    unconsolidated subsidiaries .......      425.9               8.6                --            (434.5)                  --
                                          -----------------------------------------------------------------------------------

Net income ............................   $  402.9          $   65.2          $  360.7          $ (425.9)            $  402.9
                                          ===================================================================================
</TABLE>


                                       37
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (Continued)

                 Condensed Consolidating Statement of Cash Flows

<TABLE>
<CAPTION>
                                                             John Hancock
                                               John Hancock  Variable Life                              Consolidated
                                                Financial      Insurance                                John Hancock
For the Nine Month Period Ended                  Services       Company        Other                      Financial
September 30, 2003                             (Guarantor)     (Issuer)     Subsidiaries  Eliminations  Services, Inc.
----------------------------------------------------------------------------------------------------------------------
                                                                           (in millions)

<S>                                           <C>            <C>               <C>            <C>             <C>
Net income ................................   $  733.9       $   79.7          $  671.6       $ (751.3)       $  733.9
  Adjustments to reconcile net
   income to net cash provided by
   operating activities:
    Amortization of discount-fixed
    maturities ............................         --           (7.7)            (16.7)            --           (24.4)
    Equity in net income of
      unconsolidated subsidiaries .........     (751.3)          (3.4)               --          754.7              --
    Net realized investment and other
      (gains) losses ......................         --           14.3            (112.5)           4.1           (94.1)
    Change in deferred policy
      acquisition costs ...................         --          (64.7)           (255.8)           0.1          (320.4)
    Depreciation and amortization .........        1.2            1.5              41.4             --            44.1
    Net cash flows from trading
      securities ..........................         --             --            (101.5)            --          (101.5)
    Increase in accrued investment
      income ..............................         --          (20.1)           (136.5)          (0.1)         (156.7)
    Decrease (increase) in premiums and
      accounts receivable .................        3.8            2.2             (59.8)           0.7           (53.1)
    Increase (decrease) in other
      assets and other liabilities, net ...       18.8          (46.6)           (178.4)          39.3          (166.9)
    Increase in policy liabilities
      and accruals, net ...................         --          117.2           1,586.2           12.8         1,716.2
    Increase(decrease) in income taxes ....        5.3           44.6             122.6           (6.5)          166.0
                                              ------------------------------------------------------------------------
    Net cash provided by ..................       11.7          117.0           1,560.6           53.8         1,743.1
     operating activities
Cash flows from investing activities:
Sales of:
    Fixed maturities available-for-sale ...         --          494.4           8,965.6           21.7         9,481.7
    Equity securities available-for-sale ..         --           33.3             223.9             --           257.2
    Real estate ...........................         --             --              97.5             --            97.5
    Short term investments and other
      invested assets .....................         --            7.4             155.2             --           162.6
    Home Office properties ................         --             --             887.6             --           887.6
Maturities, prepayments, and scheduled
  redemptions of:
    Fixed maturities held-to-maturity .....         --            1.2             189.1            0.6           190.9
    Fixed maturities available-for-sale ...         --          152.4           2,713.4           36.7         2,902.5
    Short term investments and other
     invested assets ......................         --             --             816.3            0.6           816.9
    Mortgage loans on real estate .........         --           50.5             916.3            9.8           976.6
</TABLE>


                                       38
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (Continued)

           Condensed Consolidating Statement of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                                    John Hancock
                                                     John Hancock   Variable Life                                  Consolidated
                                                      Financial       Insurance                                    John Hancock
For the Nine Month Period Ended                        Services        Company         Other                        Financial
September 30, 2003                                   (Guarantor)      (Issuer)      Subsidiaries    Eliminations  Services, Inc.
--------------------------------------------------------------------------------------------------------------------------------
                                                                                   (in millions)
<S>                                                  <C>             <C>            <C>             <C>               <C>
Purchases of:
    Fixed maturities held-to-maturity ............          --              --      $    (77.3)             --        $    (77.3)
    Fixed maturities available-for-sale ..........          --       $(1,363.2)      (14,823.8)      $   (48.3)        (16,235.3)
    Equity securities available-for-sale .........          --           (61.7)         (198.5)           (0.4)           (260.6)
    Real estate ..................................          --            (0.1)          (32.6)             --             (32.7)
    Short term investments and other invested
      assets .....................................          --           (44.6)       (1,259.3)           (2.0)         (1,305.9)
    Mortgage loans on real estate issued .........          --          (171.2)       (1,344.9)           (6.1)         (1,522.2)
    Net cash paid related to acquisition of
      business ...................................          --              --            (3.8)             --              (3.8)
    Other, net ...................................          --            (8.9)         (158.2)           (0.2)           (167.3)
    Capital contributed to unconsolidated
      subsidiaries ...............................   $   (39.4)             --              --            39.4                --
    Dividends received from unconsolidated
      subsidiaries ...............................       100.0              --              --          (100.0)               --
                                                     ---------------------------------------------------------------------------
    Net cash provided by (used in) ...............        60.6          (910.5)       (2,933.5)          (48.2)         (3,831.6)
      investing activities

    Cash flows from financing activities:
    Capital contributions paid by parent .........          --              --            39.4           (39.4)               --
    Acquisition of treasury stock ................       (11.8)             --              --              --             (11.8)
    Dividends paid on common stock ...............          --              --          (100.0)          100.0                --
    Universal life and investment-type contract
      deposits ...................................          --           858.4         6,219.5              --           7,077.9
    Universal life and investment-type contract
      maturities and withdrawals .................          --          (294.6)       (4,985.5)          (23.9)         (5,304.0)
    Issuance of consumer notes ...................          --              --           769.4              --             769.4
    Issuance of short-term debt ..................          --           113.0           148.4          (113.0)            148.4
    Repayment of short-term debt .................          --           (77.0)         (127.9)           77.0            (127.9)
    Repayment of long-term debt ..................          --              --            (4.6)             --              (4.6)
    Net decrease in commercial paper .............       (59.5)             --              --              --             (59.5)
                                                     ---------------------------------------------------------------------------
    Net cash (used in) provided by financing
      activities .................................       (71.3)          599.8         1,958.7             0.7           2,487.9
</TABLE>


                                       39
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (Continued)

           Condensed Consolidating Statement of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                       John Hancock
                                       John Hancock   Variable Life                                  Consolidated
                                        Financial       Insurance                                    John Hancock
For the Nine Month Period Ended          Services        Company        Other                         Financial
September 30, 2003                     (Guarantor)       (Issuer)    Subsidiaries    Eliminations    Services, Inc.
--------------------------------------------------------------------------------------------------------------------
                                                                    (in millions)

<S>                                      <C>           <C>            <C>              <C>                 <C>
    Net increase (decrease) in cash
      and cash equivalents ...........   $    1.0      $ (193.7)      $  585.8         $    6.3            $  399.4

Cash and cash equivalents at
  beginning of period ................       14.6         200.7          973.1              2.2             1,190.6
                                         --------------------------------------------------------------------------

Cash and cash equivalents at end
  of period ..........................   $   15.6      $    7.0       $1,558.9         $    8.5            $1,590.0
                                         ==========================================================================
</TABLE>


                                       40
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (Continued)

                 Condensed Consolidating Statement of Cash Flows

<TABLE>
<CAPTION>
                                                             John Hancock
                                              John Hancock  Variable Life                                     Consolidated
                                               Financial      Insurance                                       John Hancock
For the Nine Month Period Ended                 Services       Company          Other                          Financial
September 30, 2002                            (Guarantor)      (Issuer)     Subsidiaries      Eliminations   Services, Inc.
---------------------------------------------------------------------------------------------------------------------------
                                                                           (in millions)

<S>                                            <C>             <C>             <C>               <C>               <C>
Net income .................................   $  402.9        $   65.2        $  360.7          $ (425.9)         $  402.9
  Adjustments to reconcile net
    income to net cash provide by
    (used in) operating activities:
    Amortization of discount-fixed
      maturities ...........................         --             0.2           (89.4)             (0.4)            (89.6)
    Equity in net income of
      unconsolidated subsidiaries ..........     (425.9)           (8.6)             --             434.5                --
    Net realized investment and other
     (gains) losses ........................         --            20.9           239.1              (4.6)            255.4
    Change in deferred policy
     acquisition costs .....................         --           (71.3)         (145.0)              0.1            (216.2)
    Depreciation and amortization ..........        0.5             0.2            46.0               0.8              47.5
    Net cash flows from trading
      securities ...........................         --              --            47.5                --              47.5
    Increase in accrued investment income ..         --           (11.0)          (63.2)             (0.5)            (74.7)
    (Increase) decrease in premiums and
      accounts receivable ..................         --             9.6           (93.9)              0.8             (83.5)
    Increase (decrease) in other
      assets and other liabilities, net ....       50.5           (36.7)          (47.2)             (2.5)            (35.9)
    (Decrease) increase in policy
      liabilities and accruals, net ........         --           (85.2)        1,619.8              17.2           1,551.8
      Increase (decrease) in income taxes ..       18.4            (0.2)           60.4              (1.3)             77.3
                                               ----------------------------------------------------------------------------
    Net cash provided by (used in) .........       46.4          (116.9)        1,934.8              18.2           1,882.5
      operating activities
Cash flows from investing activities:
Sales of:
    Fixed maturities available-for-sale ....         --           330.1         3,359.7              16.5           3,706.3
    Equity securities available-for-sale ...         --             5.3           321.9               1.2             328.4
    Real estate ............................         --             0.3            69.9                --              70.2
    Short term investments and other
      invested assets ......................         --              --            89.8                --              89.8
Maturities, prepayments, and scheduled
  redemptions of:
    Fixed maturities held-to-maturity ......         --             1.8           128.5               0.8             131.1
    Fixed maturities available-for-sale ....         --            99.2         2,156.9              25.5           2,281.6
    Short term investments and other
      invested assets ......................         --             1.9           367.5               0.3             369.7
    Mortgage loans on real estate ..........         --            55.4           915.2              20.3             990.9
</TABLE>


                                       41
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (Continued)

           Condensed Consolidating Statement of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                                    John Hancock
                                                 John Hancock      Variable Life                                    Consolidated
                                                   Financial         Insurance                                      John Hancock
For the Nine Month Period Ended                    Services           Company          Other                         Financial
September  30, 2002                               (Guarantor)         (Issuer)      Subsidiaries    Eliminations   Services, Inc.
---------------------------------------------------------------------------------------------------------------------------------
                                                                                   (in millions)
<S>                                               <C>              <C>              <C>              <C>             <C>
Purchases of:
    Fixed maturities held-to-maturity .........          --        $    (1.1)       $   (10.7)              --       $    (11.8)
    Fixed maturities available-for-sale .......          --           (848.6)        (9,605.7)       $   (52.4)       (10,506.7)
    Equity securities available-for-sale ......          --             (6.5)          (146.8)            (0.4)          (153.7)
    Real estate ...............................          --             (0.1)           (14.2)              --            (14.3)
    Short term investments and other
      invested assets .........................          --            (20.0)          (728.3)            (2.4)          (750.7)
    Mortgage loans on real estate issued ......          --           (115.1)        (1,528.7)           (11.7)        (1,655.5)
    Other, net ................................          --            (24.0)            50.8              5.6             32.4
    Capital contributed to unconsolidated
      subsidiaries ............................   $   (18.3)              --               --             18.3               --
    Dividends received from unconsolidated
      subsidiaries ............................       111.0               --               --           (111.0)              --
                                                  ------------------------------------------------------------------------------
    Net cash provided by (used in) investing
      activities ..............................        92.7           (521.4)        (4,574.2)           (89.4)        (5,092.3)

    Cash flows from financing activities:
    Capital contributions paid by parent ......          --               --             18.3            (18.3)              --
    Acquisition of treasury stock .............      (371.5)              --               --               --           (371.5)
    Dividends paid on common stock ............          --               --           (111.0)           111.0               --
    Universal life and investment-type
      contract deposits .......................          --            878.1          6,596.8               --          7,474.9
    Universal life and investment-type
      contract maturities and withdrawals .....          --           (280.1)        (3,983.1)           (24.1)        (4,287.3)
    Issuance of short-term debt ...............          --               --             69.0               --             69.0
    Repayment of short-term debt ..............          --               --            (18.0)              --            (18.0)
    Repayment of long-term debt ...............          --               --            (47.9)              --            (47.9)
    Net increase in commercial paper ..........       144.8               --               --               --            144.8
                                                  ------------------------------------------------------------------------------
    Net cash (used in) provided by financing
      activities ..............................      (226.7)           598.0          2,524.1             68.6          2,964.0
</TABLE>


                                       42
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

       NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Note 10 -- Information Provided in Connection with Market Value Annuity of
           John Hancock Variable Life Insurance Company - (Continued)

           Condensed Consolidating Statement of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                      John Hancock
                                      John Hancock   Variable Life                                  Consolidated
                                       Financial       Insurance                                    John Hancock
For the Nine Month Period Ended         Services        Company         Other                        Financial
September 30, 2002                    (Guarantor)       (Issuer)     Subsidiaries    Eliminations  Services, Inc.
-----------------------------------------------------------------------------------------------------------------
                                                                    (in millions)

<S>                                   <C>             <C>              <C>              <C>              <C>
   Net decrease in cash and cash
     equivalents ..................   $  (87.6)       $  (40.3)        $ (115.3)        $   (2.6)        $ (245.8)

Cash and cash equivalents at
  beginning of period .............      109.4           108.4          1,088.9              7.0          1,313.7
                                      ---------------------------------------------------------------------------

Cash and cash equivalents at end
  of period .......................   $   21.8        $   68.1         $  973.6         $    4.4         $1,067.9
                                      ===========================================================================
</TABLE>

Note 11 -- Significant Event

On September 28, 2003, the Company entered into a definitive merger agreement
with Manulife which is expected to close early in the second quarter of 2004. In
accordance with the agreement, each share of JHFS common stock will, at the time
of the merger, be converted into the right to receive 1.1853 shares of Manulife
stock. It is estimated that the shares of Manulife common stock to be issued to
JHFS shareholders in the merger will represent approximately 42% of the
outstanding Manulife common stock after the merger. The closing of the merger is
subject to certain conditions, including the adoption of the merger agreement by
the affirmative vote of JHFS shareholders holding a majority of the shares
outstanding and the approval by certain U.S. and Canadian regulatory authorities
including the U.S. Federal Trade Commission, the Commonwealth of Massachusetts
and other state regulatory agencies. Until the merger occurs, the Company will
continue to operate independently of Manulife. Thereafter the Company will
operate as a subsidiary of Manulife. The John Hancock name will be Manulife's
primary U.S. brand.

Note 12 -- Subsequent Event

On October 31, 2003, the Company announced the sale of the international equity
management business of its institutional investment subsidiary, Independence
Investment, LLC effective November 3, 2003.

On November 3, 2003, the Company announced that its Board of Directors has
declared an annual dividend to its shareholders of $0.35 per common share
payable on December 11, 2003 to shareholders of record on November 18, 2003.

On November 4, 2003, the Company announced the close of the sale of its group
life insurance business with the receipt of approximately $6.7 million in cash
proceeds.


                                       43
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

ITEM 2. MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS
of OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) addresses the financial condition of John Hancock Financial
Services, Inc. (John Hancock, JHFS or the Company) as of September 30, 2003,
compared with December 31, 2002, and its consolidated results of operations for
the three and nine month periods ended September 30, 2003 and September 30,
2002, and, where appropriate, factors that may affect future financial
performance. This discussion should be read in conjunction with the Company's
MD&A and annual audited financial statements as of December 31, 2002 included in
the Company's Form 10-K for the year ended December 31, 2002 filed with the
United States Securities and Exchange Commission (hereafter referred to as the
Company's 2002 Form 10-K) and unaudited consolidated financial statements and
related notes included elsewhere in this Form 10-Q. The Company's financial
statements, press releases, analyst supplements and other information are
available on the internet at www.jhancock.com, under the link labeled "Investor
Relations". In addition, all of the Company's United States Securities and
Exchange Commission filings are available on the internet at www.sec.gov, under
the name Hancock John Financial Services.

     Statements, analyses, and other information contained in this report
relating to trends in the Company's operations and financial results, the
markets for the Company's products, the future development of the Company's
business, and the contingencies and uncertainties to which the Company may be
subject, as well as other statements including words such as "anticipate,"
"believe," "plan," "estimate," "intend," "will," "should," "may," and other
similar expressions, are "forward-looking statements" under the Private
Securities Litigation Reform Act of 1995. Such statements are made based upon
management's current expectations and beliefs concerning future events and their
potential effects on the Company. Future events and their effects on the Company
may not be those anticipated by management. The Company's actual results may
differ materially from the results anticipated in these forward-looking
statements. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Forward-Looking Statements" included herein for a
discussion of factors that could cause or contribute to such material
differences.

Announced Merger with Manulife Financial Corporation

      On September 28, 2003, the Company entered into a definitive merger
agreement with Manulife which is expected to close early in the second quarter
of 2004. In accordance with the agreement, each share of JHFS common stock will,
at the time of the merger, be converted into the right to receive 1.1853 shares
of Manulife stock. It is estimated that the shares of Manulife common stock to
be issued to JHFS shareholders in the merger will represent approximately 42% of
the outstanding Manulife common stock after the merger. The closing of the
merger is subject to certain conditions, including the adoption of the merger
agreement by the affirmative vote of JHFS shareholders holding a majority of the
shares outstanding and the approval by certain U.S. and Canadian regulatory
authorities including the U.S. Federal Trade Commission, the Commonwealth of
Massachusetts and other state regulatory agencies. Until the merger occurs, the
Company will continue to operate independently of Manulife. Thereafter the
Company will operate as a subsidiary of Manulife. The John Hancock name will be
Manulife's primary U.S. brand. This Form 10-Q does not reflect or assume any
changes to JHFS' business as a result of the proposed merger with Manulife. For
additional information, refer to our public filings with the SEC relating to the
merger.

Critical Accounting Policies

      General

      We have identified the accounting policies below as critical to our
business operations and understanding of our results of operations. For a
detailed discussion of the application of these and other accounting policies,
see Note 1--Summary of Significant Accounting Policies in the Notes to
Consolidated Financial Statements in the Company's 2002 Form 10-K. Note that the
application of these accounting policies in the preparation of this report
requires management to use judgments involving assumptions and estimates
concerning future results or other developments including the likelihood, timing
or amount of one or more future transactions or events. There can be no
assurance that actual results will not differ from those estimates. These
judgments are reviewed frequently by senior management, and an understanding of
them may enhance the reader's understanding of the Company's financial
statements. We have discussed the identification, selection and disclosure of
critical accounting estimates and policies with the Audit Committee of the Board
of Directors.

      Consolidation Accounting

      In January 2003, the Financial Accounting Standards Board issued
Interpretation 46, "Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51," (FIN 46) which clarifies the consolidation
accounting guidance of Accounting Research Bulletin No. 51, "Consolidated
Financial Statements," (ARB No. 51) to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. Such
entities are known as variable interest entities (VIEs). The discussion below
describes those entities which the Company has identified as


                                       44
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

candidates for consolidation under FIN 46, which was recently deferred by the
FASB, requiring consolidation as of December 31, 2003.

      The Investment Management Segment of the Company manages invested assets
for customers under various fee-based arrangements. We use a variety of special
purpose entities (SPEs) to hold assets under management for customers under
these arrangements. These entities include investment vehicles commonly known as
collateralized debt obligations (CDOs). In certain cases various business units
of the Company make investments in the equity and/or debt of these entities to
support their insurance liabilities. Results of one of the CDOs are consolidated
with the Company's financial results, while the remaining CDOs are not
consolidated since the Company's equity interest is minor and the Company does
not guarantee payment of the CDOs' liabilities, except for guarantees made to
investors as part of separate account contracts which are already included in
separate account liabilities in the Company's consolidated balance sheets.

      The Company generates income tax benefits by investing in apartment
properties (the Properties) that qualify for low income housing and/or historic
tax credits. The Company invests in the Properties directly, and also invests
indirectly via limited partnership real estate investment funds, which are
consolidated into the Company's financial statements. The Properties are
organized as limited partnerships or limited liability companies each having a
managing general partner or a managing member. The Company is usually the sole
limited partner or investor member in each Property; it is not the general
partner or managing member in any Property. The Properties typically raise
additional capital by issuing long term debt, which at times is guaranteed or
otherwise subsidized by federal or state agencies. In certain cases, the Company
invests in the mortgages of the Properties, which are non-recourse to the
general assets of the Company. In the event of default by a mortgagee of a
Property, the mortgage is subject to foreclosure.

      The Company has a number of relationships with a disparate group of
entities, which result from the Company's direct investment in their equity
and/or debt. Two of these entities are energy investment partnerships, two are
investment funds organized as limited partnerships and three are operating
companies (a ski resort developer/operator, a stepvan manufacturer and a steel
spring manufacturing company). Subsequent to the Company's investment in them,
the operating companies underwent corporate reorganizations. The Company has
made no guarantees to any other parties involved with these entities, and has
only two outstanding capital commitments to the investment funds.

      The Company is evaluating whether each of these entities is a VIE, and if
so, whether consolidation accounting should be used for each. The Company is
also in the process of estimating the future potential impact of consolidating
any potential VIE with which it is involved. However, in accordance with FIN 46,
it is possible that if the Company consolidates some of these entities, the
Company may, as a result, report lower consolidated net income and resulting
lower consolidated shareholders' equity in the short or medium term even though
the Company's shareholders do not have direct economic exposure to the
additional VIE losses recognized during consolidation. These losses would
ultimately reverse when the Company's status as primary beneficiary lapses.

      Additional liabilities recognized as a result of consolidating any of
these entities would not represent additional claims on the general assets of
the Company; rather, they would represent claims against additional assets
recognized by the Company as a result of consolidating the VIEs. Conversely,
additional assets recognized as a result of consolidation would not represent
additional assets which the Company could use to satisfy claims against its
general assets, rather they would be used only to settle additional liabilities
recognized as a result of consolidation.

      The Company's maximum loss in relation to these entities is limited to its
investments in them, future capital commitments made, and where the Company is
the issuer of separate account wrap guarantees to third party investors in these
entities, the amount of wrapped investments. Therefore, the Company believes
that these transactions have no impact on the Company's liquidity and capital
resources beyond what is already presented in the consolidated financial
statements and notes thereto. It is the Company's intent to display any
consolidated entities clearly on the face of the balance sheets with appropriate
disclosures. See Note 3 - Relationships with Variable Interest Entities to the
unaudited consolidated financial statements.

      The Company will adopt FIN 46 on December 31, 2003, and has elected to
apply the provisions of FIN 46 prospectively. The Company is currently
estimating the impact on its consolidated financial position, results of
operations and cash flows of consolidating those VIEs for which the Company is
the primary beneficiary. The Company has not entered into primary beneficiary
relationships with any VIEs since January 31, 2003.

      Amortization of Deferred Acquisition Costs

      Costs that vary with, and are related primarily to, the production of new
business have been deferred to the extent that they are deemed recoverable and
appear as an asset on our consolidated balance sheets. Such costs include
commissions,


                                       45
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

certain costs of policy issue and underwriting, and certain agency expenses.
Similarly, any amounts assessed as initiation fees or front-end loads are
recorded as unearned revenue. The Company tests the recoverability of the asset
recorded for deferred policy acquisition costs, or DAC, annually with a model
that uses data such as market performance of its funds, lapse rates and expense
levels. At September 30, 2003 the Company's DAC asset was $4,172.3 million, or
3.8% of total assets. We amortize DAC on term life and long-term care insurance
ratably with premiums. We amortize DAC on our annuity products and retail life
insurance, other than term, based on a percentage of the estimated gross profits
over the life of the policies, which are generally twenty years for annuities
and thirty years for life policies. Our estimated gross profits are computed
based on assumptions related to the underlying policies including mortality,
lapse, expenses, and asset growth rates. We amortize DAC and unearned revenue on
these policies at a constant percentage of gross profits over the life of the
policies.

      Estimated gross profits, including net realized investment and other gains
(losses), are adjusted periodically to take into consideration the actual
experience to date and assumed changes in the remaining gross profits. When
estimated gross profits are adjusted, we also adjust the amortization of DAC to
maintain a constant amortization percentage over the life of the policies. Our
current estimated gross profits include certain judgments by our actuaries
concerning mortality, lapse and asset growth that are based on a combination of
actual Company experience and historical market experience of equity and fixed
income returns. Short-term variances of actual results from the judgments made
by management can impact quarter to quarter earnings. Our history has shown us
that the actual results over time for mortality, lapse and the combination of
investment returns and crediting rates (referred in the industry as interest
spread) for the life insurance and annuity products have reasonably followed the
long-term historical trends. In recent years, actual results for market
experience, or asset growth, have fluctuated considerably from historical trends
and the long-term assumptions made in calculating expected gross profits.

      The effects on the amortization of DAC and unearned revenues of revisions
to estimated gross margins and profits are reflected in earnings in the period
such revisions are made. Expected gross profits or expected gross margins are
discounted at periodically revised interest rates and are applied to the
remaining benefit period. At both September 30, 2003 and December 31, 2002, the
average discount rate was 8.4% for participating traditional life insurance
products and 6.0% and 6.2%, respectively, for universal life products. The total
amortization period was 30 years for both participating traditional life
insurance products and universal life products.

      The Company's future assumptions with respect to the expected gross
profits in its variable life insurance business in the Protection Segment and
variable annuity business in the Asset Gathering Segment are 8%, gross of fees
(which are approximately 1% to 2%), for the long-term growth rate assumption and
13% gross of fees on average for the next five years.


                                       46
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Sensitivity of Deferred Acquisition Costs Amortization. The level of DAC
amortization in the fourth quarter of 2003 will vary if separate account growth
rates vary from our current assumptions. The table below shows the estimated
increased (decreased) quarterly DAC amortization that will result if actual
separate account annualized growth rates are different than the rates assumed in
our DAC models.

                                                            Asset
                                           Protection     Gathering       Total
                                           ----------     ---------       -----
                                                        (in millions)
18%.....................................    $(0.2)         $ (0.5)       $ (0.7)
13%.....................................       --              --            --
 8%.....................................      0.2             1.8           2.0

      Q3 2002 Unlocking: As of September 30, 2002, the Company changed several
future assumptions with respect to the expected gross profits in its variable
life business in the Protection Segment and variable annuity business in the
Asset Gathering Segment. First, we lowered the long-term growth rate assumption
from 9% to 8% gross of fees (which are approximately 1% to 2%). Second, we
lowered the average rates for the next five years from the mid-teens to 13%
gross of fees. Finally, we increased certain fee rates on these policies (the
variable series trust (VST) fee increase). These three changes are referred to
collectively as the Q3 2002 Unlocking. The result of these changes in
assumptions was a net write-off of deferred policy acquisition costs of $36.1
million in the variable annuity business in the Asset Gathering Segment and
$13.1 million (net of $12.3 million of unearned revenue and $2.5 million in
policy benefit reserves) in the variable life business in the Protection
Segment. The impact on net income of the Q3 2002 Unlocking was approximately
$27.5 million, or $0.09 diluted earnings per share.

      Benefits to Policyholders

      The liability for "future policy benefits" is the largest liability
included in our consolidated balance sheets, equal to 44.1% of total liabilities
as of September 30, 2003. Changes in this liability are generally reflected in
the "benefits to policyholders" caption in our consolidated statements of
income. This liability is primarily comprised of the present value of estimated
future payments to holders of life insurance and annuity products based on
certain management judgments. Reserves for future policy benefits of certain
insurance products are calculated using management's judgments of mortality,
morbidity, lapse, investment performance and expense levels that are based
primarily on the Company's past experience and are therefore reflective of the
Company's proven underwriting and investing abilities. Once these assumptions
are made for a given policy or group of policies, they will not be changed over
the life of the policy unless the Company recognizes a loss on the entire line
of business. The Company periodically reviews its policies for loss recognition
and, based on management's judgment, the Company from time to time may recognize
a loss on certain lines of business. Short-term variances of actual results from
the judgments made by management are reflected in current period earnings and
can impact quarter to quarter earnings.

      Investment in Debt and Equity Securities

      Impairments on our investment portfolio are recorded as a charge to income
in the period when the impairment is judged by management to occur. See the
General Account Investments section of this document and "Quantitative and
Qualitative Information About Market Risk--Credit Risk" section of this document
for a more detailed discussion of the investment officers' professional
judgments involved in determining impairments and fair values.

      Certain of our fixed income securities classified as held-to-maturity and
available-for-sale are not publicly traded, and quoted market prices are not
available from brokers or investment bankers on these securities. Changes in the
fair values of the available-for-sale securities are recorded in other
comprehensive income as unrealized gains and /or losses. We calculate the fair
values of these securities ourselves through the use of pricing models and
discounted cash flows calling for a substantial level of professional investment
management judgment. Our approach is based on currently available information,
including information obtained by reviewing similarly traded securities in the
market, and we believe it to be appropriate and fundamentally sound. However,
different pricing models or assumptions or changes in relevant current
information could produce different valuation results. The Company's pricing
model takes into account a number of factors based on current market conditions
and trading levels of similar securities. These include current market based
factors related to credit quality, country of issue, market sector and average
investment life. The resulting prices are then reviewed by the pricing analysts
and members of the Controller's Department. Our pricing analysts take
appropriate action to reduce valuation of securities where an event occurs that
negatively impacts the securities' value. Certain events that could impact the
valuation of securities include issuer credit ratings, business climate,
management changes at the investee level, litigation and government actions,
among others.

      As part of the valuation process we attempt to identify securities which
may have experienced an other than temporary decline in value, and thus require
the recognition of impairment losses. To assist in identifying impairment
losses, at the end of each quarter our Investment Review Committee reviews all
securities where market value has been less than ninety percent of


                                       47
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

amortized cost for three months or more to determine whether impairment losses
need to be taken. This committee includes the head of workouts, the head of each
industry team, the head of portfolio management, the Chief Investment Officer,
and the Corporate Risk Officer who reports to the Chief Financial Officer. The
analysis focuses on each investee company's or project's ability to service its
debts in a timely fashion and the length of time the security has been trading
below amortized cost. The results of this analysis are reviewed quarterly by the
Life Company's Committee of Finance, a subcommittee of the Life Company's Board
of Directors. To supplement this process, a quarterly review is made of the
entire fixed maturity portfolio to assess credit quality, including a review of
all impairments with the Life Company's Committee of Finance. See "Management's
Discussion and Analysis of Financial Condition and Analysis of Financial
Condition and Results of Operations--General Account Investments" section of
this document for a more detailed discussion of this process and the judgments
used therein.

      Benefit Plans

      The Company annually reviews its pension and other post-employment benefit
plan assumptions for the discount rate, the long-term rate of return on plan
assets, and the compensation increase rate. All assumptions are reviewed with
the Audit Committee.

      The assumed discount rate is set in the range of (a) the rate from the
December daily weighted average of long-term corporate bond yields (as published
by Moody's Investor Services for rating categories A, Aa, Aaa, and Baa) less a
5% allowance for expenses and default and (b) the rate from the rounded average
of the prior year's discount rate and the rate in (a) above. The discount rate
in effect for 2003 is 6.75%. A 0.25% increase in the discount rate would
decrease pension benefits Projected Benefit Obligation (PBO) and 2003 Net
Periodic Pension Cost (NPPC) by approximately $65.1 million and $4.9 million
respectively. A 0.25% increase in the discount rate would decrease other post-
employment benefits Accumulated Postretirement Benefit Obligation (APBO) and
2003 Net Periodic Benefit Cost (NPBC) by approximately $18.1 million and $1.2
million, respectively.

      The assumed long-term rate of return on plan assets is generally set at
the long-term rate expected to be earned (based on the Capital Asset Pricing
Model and similar tools) based on the long-term investment policy of the plans
and the various classes of the invested funds. For 2003, net periodic pension
(and benefit) cost, an 8.75% long term rate of return assumption is being used.
A 0.25% increase in the long-term rate of return would decrease 2003 NPPC by
approximately $4.6 million and 2003 NPBC by approximately $0.5 million. The
expected return on plan assets is based on the fair market value of the plan
assets as of December 31, 2002. The target asset mix of the plan is: 50%
domestic stock, 15% international stock, 10% private equity, and 25% fixed
income.

      The compensation rate increase assumption is generally set at a rate
consistent with current and expected long-term compensation and salary policy
including inflation. A change in the compensation rate increase assumption can
be expected to move in the same direction as a change in the discount rate. A
0.25% decrease in the salary scale would decrease pension benefits PBO and NPPC
by approximately $8.3 million and $1.2 million respectively. Post employment
benefits are independent of compensation.

      The Company uses a 5% corridor for the amortization of actuarial
gains/losses. Actuarial gains/losses are amortized over approximately 13 years
for pension costs and over approximately 13 years for other benefit costs.

      Prior service costs are amortized over approximately 9 years for pension
costs and over approximately 17 years for post employment benefit costs.

      Income Taxes

      Our reported effective tax rate on net income was 21.2% and 25.2% for the
three month periods ending September 30, 2003 and 2002, respectively, and 27.6%
and 24.6% for the nine month periods ending September 30, 2003 and 2002,
respectively. Our effective tax rate is based on expected income, statutory tax
rates and tax planning opportunities available to us. Significant judgment is
required in determining our effective tax rate and in evaluating our tax
positions. We establish reserves when, despite our belief that our tax return
positions are fully supportable, we believe that certain positions are likely to
be challenged and that we may not succeed. We adjust these reserves in light of
changing facts and circumstances, such as the progress of a tax audit. Our
effective tax rate includes the impact of reserve provisions and changes to
reserves that we consider appropriate. This rate is then applied to our
year-to-date operating results.

      Tax regulations require certain items to be included in the tax return at
different times than the items are reflected in the financial statements. As a
result, our effective tax rate reflected in our financial statements is
different than that reported in our tax return. Some of these differences are
permanent, such as affordable housing tax credits, and some are temporary
differences, such as depreciation expense. Temporary differences create deferred
tax assets and liabilities. Deferred tax assets generally represent items that
can be used as a tax deduction or credit in our tax return in future years for
which we have


                                       48
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

already recorded the tax benefit in our income statement. Our policy is to
establish valuation allowances for deferred tax assets when the amount of
expected future taxable income is not likely to support the use of the deduction
or credit. Deferred tax liabilities generally represent tax expense recognized
in our financial statements for which payment has been deferred or expense for
which we have already taken a deduction on our tax return, but have not yet
recognized as expense in our financial statements.

      A number of years may elapse before a particular matter, for which we have
established a reserve, is audited and finally resolved. The Internal Revenue
Service is currently examining our tax returns for 1996 through 1998.

      While it is often difficult to predict the final outcome or the timing of
resolution of any particular tax matter, we believe that our reserves reflect
the probable outcome of known tax contingencies. Our tax reserves are presented
in the balance sheet within other liabilities.

Reinsurance

      We reinsure portions of the risks we assume for our protection products.
The maximum amount of individual ordinary life insurance retained by us on any
life is $10 million under an individual policy and $20 million under a
second-to-die policy. As of January 1, 2001, we established additional
reinsurance programs, which limit our exposure to fluctuations in life insurance
claims for individuals for whom the net amount at risk is $3 million or more. As
of January 1, 2001, the Company also entered into agreements with two reinsurers
covering 50% of its closed block business. The reinsurance agreements are
structured so they will not affect policyholder dividends or any other financial
items reported within the closed block, which was established at the time of the
Life Company's demutualization to protect the reasonable dividend expectations
of certain participating life insurance policyholders.

      In addition, the Company has entered into reinsurance agreements to
specifically address insurance exposure to multiple life insurance claims as a
result of a catastrophic event. The Company has put into place, effective July
1, 2002, catastrophic reinsurance covering both individual and group policies
written by all of its U.S. life insurance subsidiaries. Effective July 1, 2003,
the deductible for individual and group life insurance coverages combined was
reduced from $25.0 million to $17.5 million per occurrence and the limit of
coverage is $40 million per occurrence. Both the deductible and the limit apply
to the combined U.S. insurance subsidiaries. The Company has supplemented this
coverage by reinsuring all of its accidental death exposures in excess of
$100,000 per life under its group life insurance coverages, and 50% of such
exposures below $100,000. Should catastrophic reinsurance become unavailable to
the Company in the future, the absence of, or further limitations on,
reinsurance coverage could adversely affect the Company's future net income and
financial position.

      By entering into reinsurance agreements with a diverse group of highly
rated reinsurers, we seek to control our exposure to losses. Our reinsurance,
however, does not discharge our legal obligations to pay policy claims on the
policies reinsured. As a result, we enter into reinsurance agreements only with
highly rated reinsurers. Nevertheless, there can be no assurance that all our
reinsurers will pay the claims we make against them. Failure of a reinsurer to
pay a claim could adversely affect our business, financial condition or results
of operations.

Recent Earnings and Sales Guidance

      In its press release dated October 30, 2003 and its conference call with
financial analysts held on October 31, 2003, the Company adjusted its operating
earnings per share growth guidance for the current fiscal year to 9% to 12% from
the previously disclosed 7% to 11% based on our disciplined approach to
profitability and improved conditions in the equity markets and economy. The
revised guidance is contingent upon the economy not faltering and impacting the
Company's earnings negatively. The Company also adjusted its guidance for total
gross investment losses including impairments and disposals to $625 million to
$650 million from its previous guidance of $650 million to $750 million for the
year, and $876.5 million in 2002. Gross impairments in 2003 have improved
sequentially for three quarters, at $250 million, $103 million, and $73 million
respectively, and impairments in the fourth quarter are currently expected to be
in the $75 million to $100 million range. Due to the unpredictability of the
timing and recognition of gains and losses, especially such items as prepayment
gains, hedging adjustments and recoveries, the changing interest rate
environment, as well as the unpredictable nature of certain other unusual or
non-recurring items that management believes are not indicative of ongoing
operational performance, guidance on GAAP net income cannot be readily
estimated. Accordingly, the company is unable to provide guidance with respect
to GAAP net income, or a reconciliation of guidance on net operating income per
share to GAAP net income.

      The Company reaffirmed its guidance for both core and total life sales
which are expected to decrease from the prior year by 15% to 20%. The Company
adjusted its guidance for sales of total retail annuity sales anticipating a
decrease of 15% to


                                       49
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

20% compared to previous guidance of declines of 5% to 10% from last year. In
addition, we expect long-term care sales to exceed our previous guidance and
increase from 40%-45% from 2002 levels.

Economic Trends

      Economic trends impact profitability and sales of the Company's products.
The impact of economic trends on the Company's profitability are similar to
their impact on the financial markets. The Company estimates that a 1% increase
(decrease) in interest rates occurring evenly over a twelve month period, or an
estimated 8 basis points per month, would increase (decrease) segment after tax
operating income by approximately $4 million, and a 5% increase (decrease) in
equity markets occurring evenly over a twelve month period, or an estimated 42
basis points per month, would increase (decrease) segment after tax operating
income by approximately $10 million.

      The sales and other financial results of our retail business over the last
several years have been affected by general economic and industry trends.
Variable products, including variable life insurance and variable annuities,
until 2001 had accounted for the majority of recent increases in total premiums
and deposits for the insurance industry as a result of the strong equity market
growth in those years and the "baby boom" generation reaching its high-earnings
years and seeking tax-advantaged investments to prepare for retirement. This
trend has changed due to fluctuations in stock market performance and we have
seen investors return to fixed income products. We believe our diverse
distribution network and product offerings assist in the maintenance of assets
and provide for sales growth in most market conditions. Although sales of
traditional whole life insurance products have experienced continued declines,
sales of fixed annuity products and corporate owned life insurance have
increased. Universal life sales have also increased for the Company and for the
industry as a whole, due in part to the market's demand for products of a fixed
nature. Term life sales have increased over the past few years, as consumers
continue to seek lower cost options to solving their protection needs. With
respect to our long-term care insurance products, premiums have increased due to
the aging of the population and the expected inability of government entitlement
programs to meet their medical needs in retirement.

      Premiums and deposits of our individual annuity products decreased from a
strong prior year by 46.5% to $473.8 million for the three month period ended
September 30, 2003. Annuity premiums and deposits decreased 14.2% to $2,290.9
million for the nine-month period ended September 30, 2003. Premiums and
deposits on our long-term care insurance increased 24.9%, to $249.7 million and
23.0%, to $699.9 million for the three and nine month periods ended September
30, 2003 due to strong growth in the business and increasing renewal premiums,
while our variable life insurance product deposits in 2003 decreased 6.6%, to
$219.3 million and 14.3%, to $658.5 million, for the same time periods. The
policyholder account value in the universal life insurance product line
increased $1,249.3 million, or 39.8%, for the nine month period ended September
30, 2003 from the comparable period, due to underlying growth and the December
31, 2002 acquisition of Allmerica's fixed universal life insurance business.
Mutual fund deposits decreased $303.1 million, or 18.4%, to $1,345.5 million for
the three month period ended September 30, 2003, due to a decline in
institutional advisory account sales. Mutual fund deposits increased $404.5
million for the nine month period ended September 30, 2003 due to an increase in
close-end fund sales from $622.2 million to $1.4 billion, partially offset by a
decrease in institutional advisory sales. Redemptions decreased $20.9 million,
or 1.6%, to $1,311.6 million and increased $297.6 million, or 8.0% to $4,003.5
million for the three and nine month periods ended September 30, 2003. We
continue to manage operating expenses aggressively to protect profit margins as
we work to stabilize and grow assets under management in the mutual funds
business. However, our mutual fund operations are impacted by general market
trends, and a downturn in the mutual fund market may negatively affect our
future operating results.

      Recent economic and industry trends also have affected the sales and
financial results of our institutional business. Sales of fund-type products
increased 36.7%, or $242.8 million, and decreased 29.2%, or $887.1 million, for
the three and nine months ended September 30, 2003. The increase in the quarter
was driven by the improved market with more John Hancock products available and
our increased success in marketing the products. Premiums on group annuity
products were down due to market competition. We continue to look for
opportunistic sales in the single premium group annuity market where our pricing
standards are met. Partially offsetting the decrease in sales was the
introduction of a SignatureNotes, a new product launched in late 2002 which
generated sales of $821.7 million for the nine months ended September 30, 2003.
SignatureNotes is designed to generate sales from the conservative retail
investor looking for protection of principle and stable returns. Through the
Company's limited-service banking subsidiary, First Signature Banks and Trust
Company, we have sold approximately $37 million of broker-sold certificates of
deposits during the quarter. Broker-sold certificates of deposits are a new
product introduced late in the third quarter of 2003 and were developed to offer
additional investment options to the conservative retail investor. Services
provided in the Investment Management Segment include advising domestic and
international institutions in investment advisory client portfolios,
individually managed and pooled separate accounts, registered investment company
funds, bond and mortgage securitizations, collateralized bond obligation funds
and mutual fund management capabilities. Assets under management of our
Investment Management Segment increased to $28,655.8 million as


                                       50
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

of September 30, 2003 from $27,491.4 million as of December 31, 2002. The $1.2
billion increase in assets under management was driven by $1.6 billion in market
appreciation offset by $0.6 billion in net outflows at Independence.

      The Canadian life insurance industry faces many of the same macro-economic
trends as the U.S. but is also operating within a relatively mature, highly
competitive market. Product innovation, operational efficiencies, consolidations
and global expansion are the key business strategies used by Canadian insurers
for business growth. In responding to this mature market environment, Maritime
Life has executed opportunistic acquisitions as one of its key business
strategies in recent years. This strategy included the acquisition of the
individual life and segregated fund business of Confederation Life in 1995,
Aetna Life Insurance of Canada in 1999, Royal & Sun Alliance Financial (Canadian
operations) in 2001 and, this year, the Canadian individual health and group
life and health businesses of Liberty Mutual Group. These acquisitions have
contributed to market share growth, higher profitability through efficiencies of
scale, and enhanced access to capital.

      Sales in the retail protection business of Maritime Life increased 34.8%
to $14.7 million and 11.1% to $37.9 million in the three and nine month periods
ended September 30, 2003, respectively, primarily attributable to the Liberty
Health acquisition. Individual life product sales have decreased from the
previous year in all categories except for "Term to 100" adjustable life
products, which have seen an 8% growth rate on a year over year basis,
attributable to favorable pricing compared to the universal life products.
Within the living benefit product line, individual disability (excluding
acquired individual health) sales have decreased 1% on a year over year basis,
but strong demand in the early half of the current year for a popular premium
rider, now withdrawn, on the critical illness products saw sales grow 57% over
the level achieved in the same period in 2002.

      Total deposits of guaranteed products, segregated fund products and group
pensions fell by 3.2% and 0.8% in the three and nine month periods over levels
last year as investors shied away from volatile equity markets in favor of "safe
haven" deposits with Canadian chartered banks. Segregated fund deposits fell
25.7% from the level obtained in the prior year, partially offset by growth in
guaranteed products of 24.8% due to renewed interest in fixed return products by
a market-shy consumer. Group pension deposits grew by 28.9% on a year over year
basis as we increase our marketing focus on this product line.

      New sales in the group life and health segment grew 336.7% and 4.7% in the
three and nine month periods ended September 30, 2003, reflecting the
acquisition of the Liberty group life and health business in the current
quarter. This product line is highly competitive with only three large providers
and is susceptible to broad economic factors, such as levels of merger and
acquisition activity within the Canadian employer environment.


                                       51
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Transactions Affecting Comparability of Results of Operations

      The acquisitions described under the table below were recorded under the
purchase method of accounting and, accordingly, the operating results have been
included in the Company's consolidated results of operations from the dates of
acquisition. The purchase prices were allocated to the assets acquired and the
liabilities assumed based on estimated fair values, with the excess of the
applicable purchase prices over the estimated fair values, if any, recorded as
goodwill. These acquisitions were made by the Company in execution of its plan
to acquire businesses that have strategic value, meet its earnings requirements
and advance the growth of its current businesses.

      The disposal described under the table below was conducted in order to
execute the Company's strategy to focus resources on businesses in which it can
have a leadership position. The table below presents actual and proforma data,
for comparative purposes, of revenue, net income and earnings per share for the
periods indicated, to demonstrate the proforma effect of the acquisitions and of
the disposal as if they occurred on January 1, 2002.

<TABLE>
<CAPTION>
                                  Three Months Ended September 30,                        Nine Months Ended September 30,
                             2003                      2002                         2003                      2002
                           Proforma       2003       Proforma       2002          Proforma       2003       Proforma       2002
                         ---------------------------------------------------------------------------------------------------------
                                                            (in millions, except per share data)

<S>                        <C>         <C>           <C>          <C>             <C>          <C>          <C>          <C>
Revenue ..............     $2,430.1    $2,430.1      $2,175.6     $2,142.9        $7,237.6     $7,204.2     $6,484.8     $6,391.1

Net income ...........        190.8       190.8         160.5        158.1           735.6        733.9        411.4        402.9

Earnings per share ...         0.66        0.66          0.55         0.54            2.55         2.54         1.40         1.37
</TABLE>

Acquisitions:

      On July 8, 2003, The Maritime Life Assurance Company (Maritime Life), a
majority owned Canadian subsidiary of the Company, completed its purchase of the
insurance business of Liberty Health, a Canadian division of US-based Liberty
Mutual Insurance Company, through a reinsurance agreement for approximately
$97.5 million. Through the agreement, Maritime Life assumed the entire business
of Liberty Health, including its group life, group disability and group health
divisions, as well as its individual health insurance business. The agreement is
subject to certain contingencies currently being negotiated that will impact the
ultimate determination of goodwill and value business acquired assets and
accordingly, no determination has been made as yet. There was no impact on the
Company's results of operations from the acquired insurance business during 2002
or the first six months of 2003.

      On December 31, 2002, the Company acquired the fixed universal life
insurance business of Allmerica Financial Corporation (Allmerica) through a
reinsurance agreement for approximately $104.3 million. There was no impact on
the Company's results of operations from the acquired insurance business during
2002.

Disposal:

      On June 19, 2003, the Company agreed to sell its group life insurance
business through a reinsurance agreement with Metropolitan Life Insurance
Company, Inc (MetLife). The Company is ceding all activity after May 1, 2003 to
MetLife. The transaction was recorded as of May 1, 2003 and closed November 4,
2003.

Subsequent Events

      On October 31, 2003, the Company announced the sale of the international
equity management business of its institutional investment subsidiary,
Independence Investment, LLC effective November 3, 2003.

      On November 3, 2003, the Company announced that its Board of Directors has
declared an annual dividend to its shareholders of $0.35 per common share
payable on December 11, 2003 to shareholders of record on November 18, 2003.

      On November 4, 2003, the Company announced the close of the sale of its
group life insurance business with the receipt of approximately $6.7 million in
cash proceeds.


                                       52
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Results of Operations

     The table below presents the consolidated results of operations for the
periods presented:

<TABLE>
<CAPTION>
                                                                            Three Months Ended        Nine Months Ended
                                                                               September 30,             September 30,
                                                                             2003         2002         2003        2002
                                                                           ----------------------------------------------
                                                                                           (in millions)
<S>                                                                        <C>          <C>          <C>         <C>
Revenues
Premiums ..............................................................    $1,034.3     $  806.7     $2,782.4    $2,512.7
Universal life and investment-type product fees .......................       209.5        212.7        617.8       613.5
Net investment income .................................................     1,038.5        968.6      3,117.1     2,917.6
Net realized investment and other gains (losses), net of related
    amortization of deferred policy acquisition costs, amounts
    credited to participating pensions contractholders and the
    policyholder dividend obligation (1) ..............................       (58.3)       (30.7)        94.1      (255.4)
Investment management revenues, commissions, and other fees ...........       138.9        129.3        393.0       419.7
Other revenue .........................................................        67.2         56.3        199.8       183.0
                                                                           ---------------------     --------------------
        Total revenues ................................................     2,430.1      2,142.9      7,204.2     6,391.1

Benefits and expenses
Benefits to policyholders, excluding amounts related to net realized
    investment and other gains (losses) credited to participating
    pension contractholders and the policyholder dividend
    obligation (2) ....................................................     1,522.9      1,303.4      4,274.3     4,002.2
Other operating costs and expenses ....................................       439.2        333.3      1,253.9     1,116.6
Amortization of deferred policy acquisition costs, excluding
    amounts related to net realized investment and other gains
    (losses) (3) ......................................................        64.8        151.1        218.2       299.9
Dividends to policyholders ............................................       161.0        143.6        443.6       438.3
                                                                           ---------------------     --------------------
        Total benefits and expenses ...................................     2,187.9      1,931.4      6,190.0     5,857.0

Income before income taxes ............................................       242.2        211.5      1,014.2       534.1
Income taxes ..........................................................        51.4         53.4        280.3       131.2
                                                                           ---------------------     --------------------

        Net income ....................................................    $  190.8     $  158.1     $  733.9    $  402.9
                                                                           =====================     ====================
</TABLE>

(1)   Net of related amortization of deferred policy acquisition costs, amounts
      credited to participating pension contractholders and the policyholder
      dividend obligation of $(35.5) million and $27.4 million for the three
      months ended September 30, 2003 and 2002, respectively, and $(33.5)
      million and $(5.6) million for the nine months ended September 30, 2003
      and 2002, respectively.
(2)   Excluding amounts related to net realized investment and other gains
      (losses) credited to participating pension contractholders and the
      policyholder dividend obligation of $(29.8) million and $10.9 million for
      the three months ended September 30, 2003 and 2002, respectively, and
      $(43.0) million and $0.4 million for the nine months ended September 30,
      2003 and 2002, respectively.
(3)   Excluding amounts related to net realized investment and other gains
      (losses) of $(5.7) million and $16.5 million for the three months ended
      September 30, 2003 and 2002, respectively and $9.5 million and $(6.0)
      million for the nine months ended September 30, 2003, respectively.

Three Months Ended September 30, 2003 Compared to Three Months Ended
September 30, 2002

      During the first quarter of 2003, the Company implemented organizational
changes within the Corporate and Other Segment which resulted in the break-out
of the Maritime Life business as its own operating segment and the
reclassification of the 2002 results for the Federal long-term care insurance
business to the Protection Segment. The Maritime Life Segment consists of our
consolidated Canadian operations, principally those of our Canadian life
insurance business, The Maritime Life Assurance Company (Maritime Life). The
following discussion presents the results of our segments on a basis consistent
with the new organization structure. The reclassifications associated with the
realignment of our operating segments had no impact on segment after-tax
operating income, or net income of the Maritime Life or Corporate and Other
Segments, other than to display these


                                       53
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

businesses separately. The reclassification associated with the Federal
long-term care insurance business has no impact on segment after-tax operating
income, or net income of the business. The reclassification increased Protection
Segment after-tax operating income and decreased Corporate and Other Segment
after-tax operating income by $0.2 million for the three month period ended
September 30, 2002.

      Consolidated income before income taxes increased 14.5%, or $30.7 million,
for the three month period ended September 30, 2003 from the prior year. The
increase was driven by growth in income before income taxes of $34.2 million in
the Protection Segment, $21.3 million in the Guaranteed and Structured Financial
Products Segment (G&SFP), and $0.3 million in the Investment Management Segment.
These increases were slightly offset by decreases in income before income taxes
of $14.6 million in the Corporate and Other Segment, $7.0 million in the Asset
Gathering Segment, and $3.5 million in the Maritime Life Segment. Consolidated
income before income taxes increased despite higher net realized investment and
other losses compared to the prior year. Net realized investment and other
losses increased $27.6 million and were driven by the increase in losses in the
Asset Gathering Segment of $63.9 million.

      Revenues increased 13.4%, or $287.2 million, from the prior year. The
increase in revenues was driven by an increase in premiums of $227.6 million, or
28.2%, compared to the prior year. Premiums in the Maritime Life Segment
increased 86.1%, or $147.2 million, due to the acquisition of certain Canadian
individual disability and group life and health business from Liberty Health, a
Canadian division of U.S. based Liberty Mutual Insurance Company. The
improvement in premiums was also driven by premium growth in the G&SFP Segment
of 232.5%, or $76.5 million, primarily as a result of increased structured
settlement sales. Slightly offsetting the increase in premiums was an 89.9%, or
$27.6 million, increase in consolidated net realized investment and other
(losses) from the prior year. See detail of current period net realized
investment and other gains (losses) in table below. The change in net realized
investment and other losses is the result of impairments of fixed maturity
securities of $71.2 million and hedging adjustments of $(95.6) million. The
largest impairments were $26.4 million on private placement securities secured
by aircraft leased by a large U.S. airline, $14.9 million relating to the
development of three natural gas fired power projects, and $13.2 million
relating to an Australian mining company. The net realized investment and other
loss on other than temporary declines in value of fixed maturity securities was
offset by a gains on the sale of fixed maturity securities. These gains resulted
from managing our portfolios for tax optimization and ongoing portfolio
positioning. For additional analysis regarding net realized investment and other
gains (losses), see General Account Investments in the MD&A.

<TABLE>
<CAPTION>
                                                             Gross Gain     Gross Loss     Hedging     Net Realized Investment
For the Three Months Ended September 30, 2003   Impairment   on Disposal   on Disposal   Adjustments    and Other Gain (Loss)
                                                ------------------------------------------------------------------------------
                                                                            (in millions)
<S>                                               <C>          <C>           <C>           <C>                <C>
Fixed maturity securities (1) (2) ............    $(71.2)      $ 68.3        $(24.3)       $(50.0)            $(77.2)
Equity securities (3) ........................      (2.2)        18.2          (4.9)           --               11.1
Mortgage loans on real estate ................        --         33.3         (16.4)        (13.9)               3.0
Real estate ..................................        --          4.6          (4.4)           --                0.2
Other invested assets ........................        --          2.3          (1.5)           --                0.8
Derivatives ..................................        --           --            --         (31.7)             (31.7)
                                                ------------------------------------------------------------------------
               Subtotal ......................    $(73.4)      $126.7        $(51.5)       $(95.6)            $(93.8)
                                                ========================================================================

      Amortization adjustment for deferred policy acquisition costs......................                        5.7
      Amounts credited to participating pension contractholders..........................                        7.2
      Amounts credited to the policyholder dividend obligation...........................                       22.6
                                                                                                              ----------
           Total.........................................................................                     $(58.3)
                                                                                                              ==========
</TABLE>

(1)   Fixed maturity securities gain on disposals includes $14.8 million of
      gains from previously impaired securities.
(2)   Fixed maturity securities loss on disposals includes $0.3 million of
      credit related losses.
(3)   Equity securities gain on disposal includes $1.5 million of gains from
      equity securities received as settlement compensation from an investee
      whose securities had previously been impaired.

      The hedging adjustments in the fixed maturities and mortgage loans asset
classes are non-cash adjustments representing the amortization or reversal of
prior fair value adjustments on assets in those classes that were or are
designated as hedged items in a fair value hedge. When an asset or liability is
so designated, its cost basis is adjusted in response to movement in interest
rates. These adjustments are non-cash and reverse with the passage of time as
the asset or liability and derivative mature. The hedging adjustments on the
derivatives represent non-cash adjustments on derivative instruments and on
assets and liabilities designated as hedged items reflecting the change in fair
value of those items.

      Premiums increased 28.2%, or $227.6 million, from the prior year. The
increase in premiums was due largely to Maritime Life Segment's aforementioned
acquisition of the insurance business of Liberty Health, a Canadian division of
U.S.-based Liberty Mutual Insurance Company, as well as increased structured
settlement sales in the G&SFP Segment. In addition, premiums in the Protection
Segment increased by $37.7 million, or 8.4%, primarily due to long-term care
insurance premiums


                                       54
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

driven by business growth from higher new sales and strong renewal premiums on
lower lapses. These increases in premiums are partially offset by a decrease in
the Corporate & Other Segment of $27.2 million, or 19.1%, due to the sale of the
group life insurance business, and a decrease in the Asset Gathering Segment of
$6.5 million, or 68.6%, driven lower sales of single premium annuities.

      Universal life and investment-type product fees were relatively flat over
the prior year, decreasing 1.5%, or $3.2 million. The decline in product fees
was driven by the Maritime Life Segment where product fees declined 6.9%, or
$3.4 million driven by disappointing sales in the current year. In addition, the
Protection Segment's product fees declined 1.0%, or $1.2 million, due primarily
to a $10.4 million decrease in amortization of unearned revenue, driven by
unearned revenue amortization of $12.3 million associated with the Q3 2002
Unlocking (See Critical Accounting Policies in this MD&A). Investment-type
product fees in the Asset Gathering Segment decreased 2.4%, or $0.7 million, due
primarily to the lower surrender fees in the variable annuity business. In the
variable annuity business, the mortality and expense fees as a percentage of
average account balances were 1.30% and 1.34% at September 30, 2003 and 2002,
respectively. Partially offsetting these declines in product fees was an
increase driven by the G&SFP Segment, where product fees increased 6.8%, or $1.0
million driven by first year loading charges on sales of structured settlements.

      Net investment income increased 7.2%, or $69.9 million, from the prior
year. The growth in net investment income was driven by the Protection Segment
which increased 7.1%, or $23.7 million, due to a 15% increase in average asset
balances, and a 25.9%, or $16.6 million increase in non-traditional life
insurance net investment income. In addition, net investment income increased
21.2%, or $31.3 million, in the Asset Gathering Segment's fixed annuity
business. Net investment income in the Maritime Life Segment increased 22.1%, or
$17.2 million, driven by higher assets balances. In addition, net investment
income improved in the Corporate and Other Segment by 97.0%, or $25.7 million.
These increases in net investment income were partially offset by declines in
the G&SFP Segment and the Investment Management Segment. The G&SFP Segment
decreased 6.4%, or $27.5 million, despite growth in the spread-based average
invested assets. The average yield on invested assets in the G&SFP Segment
decreased to 5.47% in the current period. The decline in yield is impacted by
the fluctuation of the market rates driving the return on approximately $11
billion, or 42% of the G&SFP asset portfolio, which floats with the market
rates. The floating-rate exposure on our asset portfolio is managed to match the
floating-rate exposure on our liability portfolio. The Investment Management
Segment net investment income declined by 18.2%, or $0.6 million, primarily
resulting from lower income earned on a lower average amount of mortgages held
for sale. For additional analysis of net investment income and yields see the
General Account Investments section of this MD&A.

      Advisory fees increased 7.4%, or $9.6 million, from the prior year. The
increase in fees was driven by the Maritime Life Segment which increased 83.3%,
or $4.5 million, driven by increased administrative services only (ASO) business
primarily resulting from the acquisition of Liberty Health. In addition,
advisory fees increased $3.6 million in the Investment Management Segment due
primarily to the Company's institutional advisor, the Independence group of
companies (Independence) where fees increased 1.5% or $0.2 million. Advisory
fees remained stable in the Asset Gathering Segment driven by the impact of
market appreciation on assets under management in the mutual fund business.

      Other revenue increased 19.4%, or $10.9 million, from the prior year. The
Company's other revenue is largely made up of Signature Fruit in the Corporate
and Other Segment. Signature Fruit's revenue of $55.6 million, increased $1.9
million from the prior year. Other revenue also increased in the Protection
Segment by $2.2 million due to the Federal long-term care insurance business
which officially began operation on October 1, 2002. The Federal long-term care
insurance business is a fee business where the Company administers and supports
employee long-term care insurance benefits offered by the Federal Government to
its employees.

      Benefits to policyholders increased 16.8%, or $219.5 million, from the
prior year. The increase in benefits to policyholders was driven by the Maritime
Life Segment which grew 58.8%, or $124.3 million. Higher benefits to
policyholders in the Maritime Segment included $47.1 million of benefits to
policyholders on acquired business, $40.7 million of higher group life & health
benefits driven by the reinsurance recapture (See Maritime Life Segment
discussion), $29.6 million higher individual life benefits driven by reinsurance
recapture and $7.0 million from increased provisions for future policy benefits
in the immediate annuity business. The Protection Segment's benefits to
policyholders increased 13.3%, or $68.9 million, due primarily to growth in the
long-term care insurance business. Benefits to policyholders in the G&SFP
Segment increased $14.8%, or $50.8 million, due to an increase in sales of
structured settlements. In addition, benefits to policyholders increased 5.7%,
$6.7 million in the Asset Gathering Segment, due to a $15.4 million increase in
interest credited on fixed annuity account balances due to higher average
account balances. Slightly offsetting these increases was a decline in benefits
to policyholders of 27.2%, or $31.2 million, in the Corporate & Other Segment
resulting from the sale of the group life insurance business.

      Operating costs and expenses increased 31.8%, or $105.9 million. The
increase in operating costs and expenses was driven by the Maritime Life, which
increased 125.3%, or $54.9 million. The increase in Maritime Life Segment
operating cost and expenses was due primarily to the aforementioned acquisition,
and general operating expenses increases across all businesses. Total operating
costs and expense increased 22.0%, or $20.9 million, in the Corporate and Other
Segment, driven by an increase of $7.9 million due to net periodic pension cost
and $2.1 million in other post-retirement benefits. Included in


                                       55
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

operating costs and expense is the expenses related to Signature Fruit which
increased $0.7 million to $57.9 million. Operating costs and expenses in the
Protection Segment increased 20.1%, or $15.1 million, due to increases in IT
spending, bonus plan expenses, and higher amortization of the value of business
acquired asset due to the addition of the Allmerica block assumed as of December
31, 2002. G&SFP Segment operating costs and expenses increased by 80.0%, or
$10.4 million, reflecting higher commissions combined with higher compensation
expenses. In addition, Asset Gathering Segment operating costs and expenses
increased 4.3%, or $3.6 million, driven by compensation expense. Also included
in other operating costs and expenses is $0.6 million for terminations related
to the information technology outsourcing as well as other initiatives and
curtailment and other post employment benefit related gains compared to $6.6
million in the prior year. See Note 6 - Severance included in the notes to the
unaudited consolidated financial statements.

      Amortization of deferred policy acquisition costs decreased 57.1%, or
$86.3 million, from the prior year. The decrease in amortization of deferred
policy acquisition costs was driven by the Asset Gathering Segment which
decreased 62.0%, or $41.5 million from the prior year. Within the Asset
Gathering Segment, the variable annuity businesses experienced lower
amortization of deferred policy acquisition costs by approximately 86.7%, or
$44.8 million primarily due to the Q3 2002 Unlocking which resulted in $36.1
million additional deferred policy acquisition costs amortization in the prior
year. Protection Segment amortization of deferred policy acquisition cost
decreased by 46.7%, or $33.4 million, driven by Q3 2002 Unlocking (See Critical
Accounting Policies in this MD&A) which resulted in $27.9 million in additional
amortization of deferred policy acquisition costs in the prior year (See
Critical Accounting Policies in this MD&A). The Maritime Life Segment
amortization of deferred policy acquisition costs decreased $12.6 million,
driven by changes in valuation process in the prior year.

      Dividends to policyholders increased 12.1%, or $17.4 million from the
prior year. The increase in dividends to policyholders was driven by the
Corporate & Other Segment, which increased 856.6%, or $25.4 million, due to the
accounting for the sale of the group life insurance business. Dividends to
policyholders decreased in the Protection Segment 5.8%, or $7.3 million, due to
the dividend scale cut in the traditional life insurance business.

      Income taxes were $51.4 million in 2003, compared to $53.4 million for
2002. Our effective tax rate was 21.2% in 2003, compared to 25.2% in 2002. The
lower effective tax rate was primarily due to lower capital gains, and increased
affordable housing tax credits.

Nine Months Ended September 30, 2003 Compared to Nine Months Ended
September 30, 2002

      During the first quarter of 2003, the Company implemented organizational
changes within the Corporate and Other Segment which resulted in the break-out
of the Maritime Life business as its own operating segment and the
reclassification of 2002 results for the Federal long-term care insurance
business to the Protection Segment. The Maritime Life Segment consists of our
consolidated Canadian operations, principally those of our Canadian life
insurance business, The Maritime Life Assurance Company (Maritime Life). The
following discussion presents the results of our segments on a basis consistent
with the new organization structure. The reclassifications associated with the
realignment of our operating segments had no impact on segment after-tax
operating income, or net income of the Maritime Life or Corporate and Other
Segments, other than to display these businesses separately. The
reclassification associated with the Federal long-term care insurance business
has no impact on segment after-tax operating income, or net income of the
business. The reclassification increased Protection Segment after-tax operating
income and decreased Corporate and Other Segment after-tax operating income by
$0.5 million for the nine month period ended September 30, 2002.

      Consolidated income before income taxes increased 89.9%, or $480.1
million, from the prior year. The increase was driven by growth in income before
income taxes of $38.0 million in the Asset Gathering Segment, $136.8 million in
the Protection Segment, $35.3 million in the G&SFP Segment, $31.8 million in the
Maritime Life Segment, and $8.6 million in the Investment Management Segment.
Partially offsetting these increases was a decline in the Corporate and Other
Segment of $229.6 million.

      Revenues increased 12.7%, or $813.1 million, from the prior year. The
increase in revenues was driven by the Corporate and Other Segment where net
realized investment and other gains increased $280.1 million due to a gain of
$233.8 million (and a deferred profit of $247.7 million) on the sale of the
Company's home office properties. Consolidated net realized investment and other
gains increased 136.8%, or $349.5 million from the prior year. See detail of
current period net realized investment and other gains (losses) in table below.
The change in net realized investment and other gains is the result of gains on
the disposal of fixed maturity securities and the sale of the Company's home
office properties. These net realized investment and other gains were partially
offset by other than temporary declines in value of fixed maturity securities of
$386.9 million and equity securities of $29.3 million. The largest impairments
were $37.6 million relating to a large, national farmer-owned dairy
co-operative, $36.1 million relating to a large U.S. airline, $29.8 million
relating to an Australian mining company, $27.3 million relating to a North
American transportation provider, $26.3 million related to a special purpose
company created to sublease aircraft to two U.S. airlines, and $25.0 million
relating to a toll road. For additional analysis regarding net realized
investment and other gains (losses), see General Account Investments in the
MD&A.


                                       56
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

<TABLE>
<CAPTION>
                                                              Gross Gain   Gross Loss      Hedging    Net Realized Investment
For the Nine Months Ended September 30, 2003    Impairment   on Disposal  on Disposal   Adjustments   and Other Gain (Loss)
                                               ------------------------------------------------------------------------------
                                                                            (in millions)
<S>                                              <C>            <C>        <C>            <C>               <C>
Fixed maturity securities (1) (2) ............   $(386.9)       $397.1     $ (68.9)       $(204.8)          $(263.5)
Equity securities (3) ........................     (29.3)         52.8       (10.2)            --              13.3
Mortgage loans on real estate ................        --          54.1       (28.2)         (46.7)            (20.8)
Real estate ..................................        --         244.7        (7.3)            --             237.4
Other invested assets ........................     (10.3)         16.6        (7.5)            --              (1.2)
Derivatives ..................................        --            --          --           95.4              95.4
                                               ------------------------------------------------------------------------------
               Subtotal ......................   $(426.5)       $765.3     $(122.1)       $(156.1)          $  60.6
                                               ==============================================================================

          Amortization adjustment for deferred policy acquisition costs......................                  (9.5)
          Amounts charged to participating pension contractholders...........................                   9.0
          Amounts charged to the policyholder dividend obligation............................                  34.0
                                                                                                          ---------------
               Total.........................................................................               $  94.1
                                                                                                          ===============
</TABLE>

(1)   Fixed maturities gain on disposals includes $64.0 million of gains from
      previously impaired securities.
(2)   Fixed maturities loss on disposals includes $23.3 million of credit
      related losses.
(3)   Equity securities gain on disposal includes $1.5 million of gains from
      equity securities received as settlement compensation from an investee
      whose securities had previously been impaired.

      The hedging adjustments in the fixed maturities and mortgage loans asset
classes are non-cash adjustments representing the amortization or reversal of
prior fair value adjustments on assets in those classes that were or are
designated as hedged items in fair value hedge. When an asset or liability is so
designated, its cost basis is adjusted in response to movement in interest rate.
These adjustments are non-cash and reverse with the passage of time as the asset
or liability and derivative mature. The hedging adjustments on the derivatives
represent non-cash adjustments on derivative instruments and on assets and
liabilities designated as hedged items reflecting the change in fair value of
those items.

      Premiums increased 10.7%, or $269.7 million, from the prior year. The
increase in premiums is due to an increase in the Maritime Life Segment of
$264.5 million, driven by the group life & health business following a
reinsurance recapture of significant portions of its group life, accidental
death and dismemberment and long term disability including $53.2 million from
the acquired business. Also contributing was growth in the Protection Segment,
where premiums increased $98.9 million driven by higher sales and continued
lower lapses in the long-term care insurance business and the Asset Gathering
Segment's fixed annuity business drove premiums up 82.0%, or $14.6 million.
Partially offsetting these increases were declines in premiums of $63.0 million
in the G&SFP Segment and $45.4 million in the Corporate and Other Segment.
Premiums declined in the G&SFP Segment due to lower sales resulting from market
competition and the low interest rates on sales of group annuity contracts. We
continue to look for opportunistic sales in the single premium group annuity
market where our pricing standards are met. The decrease in G&SFP Segment
premiums is offset by a decrease in G&SFP benefits to policyholders as mentioned
below in the discussion of benefits and expenses, thus current profitability is
not impacted.

      Universal life and investment-type product fees increased 0.7%, or $4.3
million from the prior year. The growth in product fees was driven by the
Protection Segment, where product fees increased 2.1%, or $7.0 million. This
increase was due to the non-traditional life insurance business, driven by
growth of the existing business and the acquisition of the Allmerica fixed
universal life insurance business as of December 31, 2002. Average account
balance in the non-traditional life insurance business increased 17.6%, or
$1,545.6 million, compared to the prior year due to the underlying growth and
the Allmerica acquisition. In addition, Maritime Life Segment product fees
decreased 0.6%, or $0.9 million, driven by a decline in fees on lower assets
under management due to segregated fund lapses. Asset Gathering Segment product
fees declined $3.1 million. Asset Gathering Segment product fees earned in the
variable annuity business decreased 9.7%, or $8.1 million, due to lower
surrender fees driven by improved lapse rates. Declines in variable annuity
product fees were partially offset by growth in the fixed annuity business where
product fees increased $4.9 million due to a 17.5% increase in the number of
contracts inforce.

      Net investment income increased 6.8%, or $199.5 million, from the prior
year. The growth in net investment income was driven by the Asset Gathering
Segment which increased 24.6%, or $103.2 million, from the prior year on growth
in invested assets backing fixed annuity products. Average invested assets in
the fixed annuity business increased 34.1%, or $10,055.8 million, while earned
rates decreased. See additional analysis in the Asset Gathering Segment MD&A. In
addition, net investment income increased in the Protection Segment by 7.3%, or
$72.5 million, from the prior year driven by the universal life insurance
business. Non-traditional life insurance net investment income increased 27.0%,
or $49.9 million, driven by the growth of the business and the acquisition of
the Allmerica fixed universal life insurance business as of December 31, 2002.
In


                                       57
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

addition, net investment income increased by 18.0%, or $42.2 million, in the
Maritime Life Segment on growth in invested assets. Net investment income
increased $3.5 million in the Investment Management Segment. Partially
offsetting these increases in net investment income was a decline of 2.5%, or
$32.5 million, in the G&SFP Segment. G&SFP Segment net investment income
decreased due to the decline in the average investment yield on invested assets
to 5.82% in the current period. The decline in yield is impacted by the
fluctuation of market rates driving the return on approximately $11 billion, or
42% of the G&SFP Segment asset portfolio which floats with market rates. The
floating rate exposure on our asset portfolio is managed to match the floating
rate exposure on our liability portfolio. For additional analysis of net
investment income and yields see the General Account Investments section of this
MD&A.

      Advisory fees decreased 6.4%, or $26.7 million, from the prior year. The
decrease in fees was driven by the Asset Gathering Segment which decreased
12.3%, or $40.3 million, driven by the mutual funds business. The mutual funds
business management advisory fees declined $29.2 million driven by a decline in
average assets under management of $653.8 million, or 2.4% from prior year.
Advisory fees increased by $8.0 million in the Maritime Life Segment driven by
the administrative services only business and the acquired business of Liberty
Mutual's Canadian group life and health unit. In addition, advisory fees
increased in the Corporate and Other Segment by $2.9 million and in the
Investment Management Segment by $2.7 million driven by the northwest property
management group.

      Other revenue increased 9.2%, or $16.8 million, from the prior year. The
Company's other revenue is largely made up of Signature Fruit in the Corporate
and Other Segment. Signature Fruit generated $178.2 million and $169.6 million
for the nine months ended September 30, 2003 and 2002, respectively. The driver
of the increase in other revenue for the Company was the $8.6 million increase
in Signature Fruit revenue. In addition, other revenue increased $5.6 million in
the Protection Segment driven by the Federal long-term care insurance business
which officially began operation on October 1, 2002. The Federal long-term care
insurance business is a fee business where the Company administers and supports
employee long-term care insurance benefits offered by the Federal Government to
its employees. Partially offsetting these increases in other revenue was a
decline of $1.5 million in the Maritime Life Segment.

      Benefits to policyholders increased 6.8%, or $272.1 million, from the
prior year. The increase in benefits to policyholders was driven by the Maritime
Life Segment which increased 40.8%, or $248.2 million, due to the growth in the
group life & health business from the reinsurance recapture transaction and
$38.3 million from the acquired business. In addition, the Protection Segment
increased 10.2%, or $156.2 million, due to growth in the long-term care
insurance business. The long term care insurance business experienced 51.7%
growth in new premiums and strong persistency during the period. In addition,
the non-traditional life insurance business experienced a 14.2%, or $32.5
million increase in benefits to policyholders driven by the acquisition of
Allmerica's fixed universal life insurance business. Also driving the increase
in benefits to policyholders was growth in the Asset Gathering Segment's fixed
annuity business, Asset Gathering Segment benefits to policyholders increased
18.1%, or $58.5 million. The growth in fixed annuity benefits to policyholders
was driven by an increase of $14.6 million in premiums and an increase in
interest credited on higher average invested assets. Average account balance in
the fixed annuity business increased 32.4%, or $2,355.9 million, while credited
rates decreased 83 basis points from the prior year. Partially offsetting these
increases in benefits to policyholders was a decrease in the G&SFP Segment of
10.7%, or $128.2 million. Lower benefits to policyholders in the G&SFP Segment
were driven by the spread-based business where annuity benefits decreased $64.6
million driven by a decrease in sales of single premium annuities and
traditional GIC's where benefits decreased $53.6 million on lower sales. In
addition, spread-based interest credited declined of 5.8%, or $47.3 million, due
to a decline in the average interest crediting rate on account balances driven
by the reset on floating rate liabilities. Average invested assets on
spread-based products in the G&SFP Segment increased 10.1%, or $2,326.7 million,
from the prior year. Corporate and Other benefits to policyholders declined
$62.6 million from the prior year primarily driven by the sale of the group life
business.

      Operating costs and expenses increased 12.3%, or $137.3 million. The
increase in the Company's operating costs and expenses were driven by the
Maritime Life Segment, which increased 42.2%, or $73.3 million. The increase in
Maritime Life Segment operating cost and expenses was due the expenses of the
acquired business which was not in the prior year results and lower reinsurance
allowances after the recapture transaction. The Corporate and Other Segment
operating costs and expenses increased 22.3%, or $62.4 million, driven by the
corporate account where net periodic pension costs increased $23.9 million,
deficiency interest increased $16.7 million, and benefits expenses increased
$10.5 million. Signature Fruit operating expenses increased $7.0 million to
$182.1 million from the prior year. In addition, operating costs and expenses
increased $12.3 million in the G&SFP Segment, $5.0 million in the Protection
Segment, and $4.0 million in the Investment Management Segment due to higher
benefit and compensation costs. Partially offsetting these increases was a
decrease in operating cost and expenses in the Asset Gathering Segment driven by
reductions in the mutual funds business on lower distribution and selling
expenses. Also included in other operating costs and expenses is $10.0 million
for planned terminations related to the information technology outsourcing as
well as other initiatives and curtailment and other post employment benefit
related gains compared to $15.6 million in the prior year. See Note 6 -
Severance to the unaudited consolidated financial statements.


                                       58
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Amortization of deferred policy acquisition costs decreased 27.2%, or
$81.7 million, from the prior year. The decrease in amortization of deferred
policy acquisition costs was driven by the Asset Gathering Segment which
decreased 33.2%, or $38.9 million from the prior year driven by the variable
annuity business. The variable annuity business experienced lower amortization
of deferred policy acquisition costs by approximately 72.3%, or $53.8 million,
primarily due to the Q3 2002 Unlocking which resulted in $36.1 million in
additional deferred policy acquisition cost amortization in this segment in the
prior year. In addition, the Protection Segment amortization of deferred policy
acquisition costs decreased 13.8%, or $20.7 million, driven by the Q3 203
Unlocking which resulted in $27.9 million of amortization in this segment in the
prior year. Amortization of deferred policy acquisition costs decreased in the
Maritime Life Segment by 81.0%, or $23.4 million, driven by changes in deferred
policy acquisition cost valuation changes.

      Dividends to policyholders increased 1.2%, or $5.3 million from the prior
year. The increase in dividends to policyholders was driven by the Corporate and
Other Segment which increased $29.6 million due to the accounting for the sale
of the group life insurance business. The increase in the Corporate and Other
Segment was partially offset by the Protection Segment, which declined 6.3%, or
$24.6 million, due to a decrease in the dividend scale on traditional life
insurance products effective the beginning of this year.

      Income taxes were $280.3 million in 2003, compared to $131.2 million for
2002. Our effective tax rate was 27.6% in 2003, compared to 24.6% in 2002. The
higher effective tax rate was primarily due to increased capital gains,
partially offset by increased affordable housing tax credits.

Results of Operations by Segment and Adjustments to GAAP Reported Net Income

      In the first quarter of 2003 the Company implemented organizational
changes within the Corporate and Other Segment which resulted in the break-out
of the Maritime Life business as its own operating segment and the
reclassification of 2002 results for the Federal long-term care insurance
business to the Protection Segment. The Maritime Life Segment consists of our
consolidated Canadian operations, principally those of our Canadian life
insurance business, The Maritime Life Assurance Company (Maritime Life). The
following MD&A discussion presents the results of our segments on a basis
consistent with the new organization structure. The reclassifications associated
with the realignment of our operating segments had no impact on segment
after-tax operating income, or net income of the Maritime Life or Corporate and
Other Segments other than to display these businesses separately. The
reclassification associated with the Federal long-term care insurance business
has no impact on segment after-tax operating income, or net income of the
business. The reclassification increased Protection Segment after-tax operating
income and decreased Corporate and Other Segment after-tax operating income by
$0.2 million and $0.5 million for the three and nine month periods ended
September 30, 2002.

      We operate our business in six segments; two segments primarily serve
domestic retail customers, two segments serve domestic institutional customers,
one segment primarily serves Canadian retail and group customers and our sixth
segment is the Corporate and Other Segment, which includes our remaining
international operations, the corporate account and several run-off businesses.
Our retail segments are the Protection Segment and the Asset Gathering Segment.
Our institutional segments are the Guaranteed and Structured Financial Products
(G&SFP) Segment and the Investment Management Segment. The Maritime Life Segment
consists primarily of the financial results of our Canadian operating
subsidiary, Maritime Life. For additional information about the Company's
business segments, please refer to the Company's 2002 Form 10-K.

      We evaluate segment performance and base some of management's incentives
on segment after-tax operating income, which excludes the effect of net realized
investment and other gains and losses and other identified transactions. In
addition, we believe most investors and analysts that follow our industry also
measure results on the same basis. Total segment after-tax operating income,
which is a non-GAAP financial measure, is determined by adjusting GAAP net
income for net realized investment and other gains and losses, and certain other
items which we believe are not indicative of overall operating trends. While
these items may be significant components in understanding and assessing our
consolidated financial performance, we believe that the presentation of segment
after-tax operating income enhances the understanding of our results of
operations by highlighting net income attributable to the normal, recurring
operations of the business. However, segment after-tax operating income is not a
substitute for net income determined in accordance with GAAP.


                                       59
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      A discussion of the adjustments to GAAP reported income, many of which
affect each operating segment, follows the table below. A reconciliation of
segment after-tax operating income, as adjusted, to GAAP reported net income
precedes each segment discussion.

<TABLE>
<CAPTION>
                                                                    Three Months Ended           Nine Months Ended
                                                                       September 30,               September 30,
                                                                    2003          2002           2003         2002
                                                                   -------------------------------------------------
                                                                                    (in millions)
<S>                                                                <C>           <C>           <C>           <C>
Segment Data:
Segment after-tax operating income:
   Protection Segment (1) ...................................      $  86.6       $  67.5       $ 250.1       $ 217.3
   Asset Gathering Segment ..................................         49.5          14.6         140.7          95.2
                                                                   ---------------------       ---------------------
     Total Retail Segments ..................................        136.1          82.1         390.8         312.5

   Guaranteed and Structured Financial Products
     Segment ................................................         70.3          75.9         237.0         218.7
   Investment Management Segment ............................          5.6           4.5          22.7          16.8
                                                                   ---------------------       ---------------------
     Total Institutional Segments ...........................         75.9          80.4         259.7         235.5

   Maritime Life Segment ....................................         23.1          24.5          62.7          56.5
   Corporate and Other Segment (1) ..........................         (8.1)         (1.2)        (36.0)         (2.4)
                                                                   ---------------------       ---------------------
     Total segment after-tax operating income ...............        227.0         185.8         677.2         602.1

After-tax adjustments:
   Net realized investment and other gains (losses), net ....        (36.2)        (23.7)         56.7        (170.9)
   Class action lawsuit .....................................           --            --            --         (19.5)
   Restructuring charges ....................................           --          (4.0)           --          (8.8)
                                                                   ---------------------       ---------------------
     Total after-tax adjustments ............................        (36.2)        (27.7)         56.7        (199.2)

GAAP Reported:
   Net income ...............................................      $ 190.8       $ 158.1       $ 733.9       $ 402.9
                                                                   =====================       =====================
</TABLE>

(1)  In 2002, during its start-up phase, the Federal long-term care insurance
     business was reported in the Corporate and Other Segment. Effective January
     1, 2003, the business and its prior year results were reclassified from the
     Corporate and Other Segment to the Protection Segment.

      Our GAAP reported net income is affected by net realized investment and
other gains (losses) and other unusual or non-recurring events and transactions
presented in the reconciliation of GAAP reported net income to segment after-tax
operating income in Note 2 -- Segment Information in the notes to the unaudited
consolidated financial statements. A description of these adjustments follows.

      In all periods, net realized investment and other gains (losses), except
for gains and losses from mortgage securitizations, have been excluded from
segment after-tax operating income because such data are often excluded by
analysts and investors when evaluating the overall financial performance of
insurers. Net realized investment and other gains and losses from mortgage
securitizations were not excluded from segment after-tax operating income
because we view the related gains and losses as an integral part of the core
business of those operations.


                                       60
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Net realized investment and other gains (losses) have been reduced by: (1)
amortization of deferred policy acquisition costs to the extent that such
amortization results from net realized investment and other gains (losses), (2)
the portion of net realized investment and other gains (losses) credited to
participating pension contractholder accounts and (3) the portion of net
realized investment and other gains (losses) credited to the policyholder
dividend obligation. We believe presenting net realized investment and other
gains (losses) in this format provides information useful in evaluating our
operating performance. This presentation may not be comparable to presentations
made by other insurers. Summarized below is a reconciliation of (a) net realized
investment and other gains (losses) per the unaudited consolidated financial
statements and (b) the adjustment made for net realized investment and other
gains (losses) to calculate segment after-tax operating income for the periods
indicated.

<TABLE>
<CAPTION>
                                                                     Three Months Ended           Nine Months Ended
                                                                        September 30,               September 30,
                                                                      2003         2002           2003         2002
                                                                    --------------------------------------------------
                                                                                      (in millions)

<S>                                                                 <C>           <C>           <C>           <C>
Net realized investment and other gains (losses) ...............    $ (93.8)      $  (3.3)      $  60.6       $(261.0)
Add amortization of deferred policy acquisition costs related
   to net realized investment and other gains (losses) .........        5.7         (16.5)         (9.5)          6.0
Add (less) amounts credited to participating pension contract
   holder accounts .............................................        7.2          11.0           9.0          18.9
Add (less) amounts credited to the policyholder dividend
    obligation .................................................       22.6         (21.9)         34.0         (19.3)
                                                                    ---------------------       ---------------------
Net realized investment and other gains (losses), net of
   related amortization of deferred policy acquisition costs,
   amounts credited to participating pension contract holders
   and the policyholder dividend obligation per unaudited
   consolidated financial statements ...........................      (58.3)        (30.7)         94.1        (255.4)
Add net realized investment and other (gains) losses
   attributable to mortgage securitizations ....................        0.6          (0.9)         (8.9)         (1.9)
                                                                    ---------------------       ---------------------
Net realized investment and other gains (losses) -  pre-tax
   adjustment to calculate segment operating income ............      (57.7)        (31.6)         85.2        (257.3)
Less income tax effect .........................................       21.5           7.9         (28.5)         86.4
                                                                    ---------------------       ---------------------
Net realized investment and other gains (losses) -  after-tax
   adjustment to calculate segment operating income ............    $ (36.2)      $ (23.7)      $  56.7       $(170.9)
                                                                    =====================       =====================
</TABLE>

      The Company incurred after-tax restructuring charges to reduce costs and
increase future operating efficiency by consolidating portions of our
operations. Additional information regarding restructuring costs is included in
Note 6 -- Severance in the notes to the unaudited consolidated financial
statements. After-tax restructuring costs, net of related pension curtailment
and other post employment benefit related gains, were $4.0 million and $8.8
million for the three and nine month periods ended September 30, 2002 and were
excluded from segment after-tax operating income. The Company incurred after-tax
restructuring costs of $0.4 million (pre-tax $0.6 million) and $6.5 million
(pre-tax of $10.0 million) for the three and nine month periods ending September
30, 2003, respectively, which are included in segment after-tax operating
income. Therefore, if restructuring charges were treated similarly in the prior
year, 2002 after-tax operating income as presented would have been lower by $4.0
million and $8.8 million for the three and nine month periods ended September
30, 2002, respectively.

      In 2002, the Company incurred a $19.5 million after-tax charge related to
the settlement of the Modal Premium class action lawsuit. The settlement
agreement involves policyholders who paid premiums on a monthly, quarterly, or
semi-annual basis rather than annually. The settlement costs are intended to
provide for relief to class members and for legal and administrative costs
associated with the settlement. In entering into the settlement, the Company
specifically denied any wrongdoing.


                                       61
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Protection Segment

     The following table presents certain summary financial data relating to the
Protection Segment for the periods indicated.

<TABLE>
<CAPTION>
                                                                         Three Months Ended       Nine Months Ended
                                                                           September 30,            September 30,
                                                                          2003       2002          2003       2002
                                                                       ------------------------------------------------
                                                                                        (in millions)
<S>                                                                        <C>        <C>         <C>        <C>
Operating Results:
Revenues
     Premiums........................................................      $488.9     $451.2      $1,419.0   $1,320.1
     Universal life and investment-type product fees.................       116.7      117.9         340.6      333.6
     Net investment income...........................................       357.8      334.1       1,059.5      987.0
     Other revenues..................................................         2.1        0.2           5.9        0.3
                                                                       -----------------------  -----------------------
         Total revenues..............................................       965.5      903.4       2,825.0    2,641.0

Benefits and expenses
     Benefits to policyholders.......................................       587.5      518.6       1,682.9    1,512.5
     Other operating costs and expenses..............................        89.9       74.2         270.4      243.7
     Amortization of deferred policy acquisition costs, excluding
       amounts related to net realized investment and other gains
       (losses)......................................................        38.3       71.7         128.8      149.5
     Dividends to policyholders......................................       119.0      126.3         366.7      391.3
                                                                       -----------------------  -----------------------
         Total benefits and expenses.................................       834.7      790.8       2,448.8    2,297.0

Segment pre-tax operating income (1).................................       130.8      112.6         376.2      344.0
Income taxes.........................................................        44.2       45.1         126.1      126.7
                                                                       -----------------------  -----------------------

Segment after-tax operating income (1)...............................        86.6       67.5         250.1      217.3

After-tax adjustments: (1)
     Net realized investment and other gains (losses)................        (2.5)     (11.5)         (5.0)     (48.5)
     Restructuring charges...........................................          --         --            --       (4.7)
     Class action lawsuit............................................          --       (0.6)           --      (18.7)
                                                                       -----------------------  -----------------------
         Total after-tax adjustments.................................        (2.5)     (12.1)         (5.0)     (71.9)

GAAP Reported:
Net income...........................................................      $ 84.1     $ 55.4      $  245.1   $  145.4
                                                                       =======================  =======================

Other Data:
Segment after-tax operating income (loss):
     Non-traditional life (variable and universal life)..............      $ 36.4     $ 22.0      $  103.2   $   79.5
     Traditional life................................................        26.7       25.0          78.3       82.0
     Long-term care..................................................        21.5       22.0          61.8       58.9
     Federal long-term care (2)......................................         1.6        0.2           4.7        0.5
     Other...........................................................         0.4       (1.7)          2.1       (3.6)
</TABLE>

(1)   See "Results of Operations by Segment and Adjustments to GAAP Reported Net
      Income" included in this MD&A.
(2)   In 2002, during its start-up phase, the Federal long-term care insurance
      business was reported in the Corporate and Other Segment. Effective
      January 1, 2003, the business and its prior year results were reclassified
      from the Corporate and Other Segment to the Protection Segment.

Three Months Ended September 30, 2003 Compared to Three Months Ended
September 30, 2002

      Segment after-tax operating income increased 28.3%, or $19.1 million, from
the prior year. Non-traditional life insurance business after-tax operating
income increased 65.5%, or $14.4 million, primarily due to an increase in net
investment income and lower amortization of deferred policy acquisition costs,
due to the prior period's unlocking of the deferred policy acquisition costs
(DAC) asset. Traditional life insurance business after-tax operating income
increased 6.8%, or $1.7 million.


                                       62
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Long-term care insurance business after-tax operating income decreased 2.3%, or
$0.5 million, resulting from higher benefit and expenses, higher amortization of
deferred policy acquisition costs, mostly offset by increased premiums and
higher net investment income. Federal long-term care insurance business
after-tax operating income increased $1.4 million as the business was in its
start up phase in the prior period.

      Revenues increased 6.9%, or $62.1 million. Premiums increased 8.4%, or
$37.7 million, primarily due to long-term care insurance premiums, which
increased 24.9%, or $49.7 million, driven by business growth from higher sales
and continued lower lapses. This increase was partially offset by a $12.0
million decrease in premiums in the traditional life insurance business due to
the run off of the closed block. Universal life and investment-type product fees
decreased 1.0%, or $1.2 million, due primarily to a $10.4 million decrease in
amortization of unearned revenue, as the prior period included higher
amortization of $12.3 million associated with the Q3 2002 Unlocking (See
Critical Accounting Policies in this MD&A). This decrease is partially offset by
the increase in the cost of insurance fees of $9.0 million resulting from growth
in the existing business and from the addition of the Allmerica block of
business assumed as of December 31, 2002. Segment net investment income
increased 7.1%, or $23.7 million, primarily due to a 15.0% increase in average
asset balances, partially offset by the effect of a 52 basis point decrease in
yields.

      Benefits and expenses increased 5.6%, or $43.9 million. Benefits to
policyholders increased 13.3%, or $68.9 million, due primarily to growth in the
long-term care insurance business. Long-term care insurance business benefits
and expenses increased 29.7%, or $64.0 million, primarily due to additions to
reserves for premium growth and higher claim volume on growth of the business
during the period. The long-term care insurance business claims are being
incurred at an aggregate rate lower than assumed in calculating the reserves of
the business. Long-term care insurance business polices have increased to 681.6
thousand from 582.6 thousand in the prior year. Other operating costs and
expenses increased $15.7 million primarily due to increases in IT spending,
bonus plans expenses, and higher amortization of the value of business acquired
asset due to the addition of the Allmerica block assumed as of December 31,
2002. Amortization of deferred policy acquisition costs decreased 46.6%, or
$33.4 million, primarily due to a $37.0 million decrease for the non-traditional
life insurance business driven by the prior period's $27.9 million of unlocking
of the DAC asset (See Critical Accounting Policies in this MD&A). Also, there
was a $2.5 million decrease in the traditional life insurance business
amortization of deferred policy acquisition costs due to lower contributions
from the closed block. These decreases were partially offset by a $6.1 million
increase in amortization of deferred policy acquisition costs from the growth in
the long-term care insurance business. Dividends to policyholders decreased
5.8%, or $7.3 million, primarily due to a dividend scale cut for the traditional
life insurance business. The Segment's effective tax rate on operating income
was 33.8% compared to 40.1% for the prior year. The decrease was primarily due
to an increase in affordable housing tax credits, a decrease in the deficiency
charge, and a net change in other permanent differences.

Nine Months Ended September 30, 2003 Compared to Nine Months Ended
September 30, 2002

      Segment after-tax operating income increased 15.1%, or $32.8 million, from
the prior year. Non-traditional life insurance business after-tax operating
income increased 29.8%, or $23.7 million, primarily due to increases in
universal life and investment-type product fees and net investment income, and
lower amortization of deferred policy acquisition costs, partially offset by
higher expenses and higher benefits to policyholders. Long-term care insurance
business after-tax operating income increased 4.9%, or $2.9 million, resulting
from growth of the business. Federal long-term care insurance business after-tax
operating income increased $4.2 million as the business was in its start up
phase in the prior period. Traditional life insurance business after-tax
operating income decreased 4.5%, or $3.7 million, primarily resulting from
decreases in premiums and net investment income partially offset by a decrease
in total benefit and expenses, driven by lower dividends.

      Revenues increased 7.0%, or $184.0 million. Premiums increased 7.5%, or
$98.9 million, primarily due to long-term care insurance premiums, which
increased 23.0%, or $131.0 million, driven by business growth from higher sales
and continued lower lapses. This increase was partially offset by a $32.1
decrease in premiums in the traditional life insurance business primarily due to
the run off of the closed block and the lower dividend scale causing purchase of
fewer paid up additions. Universal life and investment-type product fees
increased 2.1%, or $7.0 million, due primarily to the increase in the cost of
insurance fees of $21.6 million resulting from growth in the existing business
and from the addition of the Allmerica block of business assumed as of December
31, 2002. This increase is partially offset by an $11.6 million decrease in
unearned revenue, as the prior period included higher amortization of unearned
revenue of $12.3 million associated with the Q3 2002 Unlocking mentioned
previously. Segment net investment income increased 7.3%, or $72.5 million,
primarily due to a 15.0% increase in average asset balances, partially offset by
a 49 basis point decrease in yields.

      Benefits and expenses increased 6.6%, or $151.8 million. Benefits to
policyholders increased 11.3%, or $170.4 million, due primarily to growth in
long-term care insurance business. Long-term care insurance business benefits
and expenses increased 26.9%, or $166.1 million, primarily due to additions to
reserves for premium growth and higher claim volume on growth of the business
during the period. The long-term care insurance business claims are being
incurred at an aggregate rate lower than assumed in calculating the reserves on
the business. Long-term care insurance business policies have increased to 681.6
thousand from 582.6 thousand in the prior year. The non-traditional life
insurance business had an increase in benefits to


                                       63
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

policyholders of $32.5 million, which was driven by a $39.0 million increase in
interest credited on higher current year account balances and the addition of
the Allmerica business. This increase was partially offset by lower death claims
paid net of reserves released and reinsurance ceded of $6.8 million due to not
repeating higher mortality experienced in the prior year. Other operating costs
and expenses increased 11.0%, or $26.7 million, due to increases in benefit plan
expenses, IT spending, bonus plans expenses, and higher amortization of the
value of business acquired asset due to the addition of the Allmerica block
assumed December 31, 2002. Amortization of deferred policy acquisition costs
decreased 13.8%, or $20.7 million, primarily due to the non-traditional life
insurance business for the prior period's $27.9 million of unlocking of the DAC
asset in the Q3 2003 Unlocking and an $8.6 million decrease in amortization of
deferred policy acquisition costs in the traditional life insurance business due
to lower contributions from the closed block. These decreases were partially
offset by a $15.0 million increase in amortization of deferred policy
acquisition costs in the long-term care insurance business due to growth.
Dividends to policyholders decreased 6.3%, or $24.6 million, primarily due to a
dividend scale cut for the traditional life insurance business. The Segment's
effective tax rate on operating income was 33.5% compared to 36.8% for the prior
year. The decrease was primarily due to an increase in affordable housing tax
credits, a decrease in deficiency charge, and a net change in other permanent
differences.


                                       64
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Asset Gathering Segment

      The following table presents certain summary financial data relating to
the Asset Gathering Segment for the periods indicated.

<TABLE>
<CAPTION>
                                                                           Three Months Ended        Nine Months Ended
                                                                             September 30,             September 30,
                                                                            2003        2002          2003       2002
                                                                          ----------------------------------------------
                                                                                          (in millions)
<S>                                                                       <C>         <C>          <C>         <C>
Operating Results:
Revenues
     Premiums ......................................................      $     3.0   $     9.5    $    32.4   $    17.8
     Investment-type product fees ..................................           28.7        29.4         87.4        90.5
     Net investment income .........................................          179.2       147.9        522.1       418.9
     Investment management revenues, commissions
       and other fees ..............................................           98.2        98.4        285.2       325.5
     Other revenues ................................................            2.1         0.1          2.3         0.9
                                                                          ---------------------    ---------------------
         Total revenues ............................................          311.2       285.3        929.4       853.6

Benefits and expenses
     Benefits to policyholders .....................................          123.2       116.5        381.5       323.0
     Other operating costs and expenses ............................           87.8        79.2        261.9       272.8
     Amortization of deferred policy acquisition costs, excluding
       amounts related to net realized investment and other gains
       (losses) ....................................................           25.4        66.9         78.4       117.3
     Dividends to policyholders ....................................            0.1          --          0.1         0.1
                                                                          ---------------------    ---------------------
         Total benefits and expenses ...............................          236.5       262.6        721.9       713.2

Segment pre-tax operating income (1) ...............................           74.7        22.7        207.5       140.4
Income taxes .......................................................           25.2         8.1         66.8        45.2
                                                                          ---------------------    ---------------------

Segment after-tax operating income (1) .............................           49.5        14.6        140.7        95.2
                                                                          ---------------------    ---------------------

After-tax adjustments: (1)
     Net realized investment and other gains (losses), net .........           (7.2)       34.5        (18.5)        6.5
     Restructuring charges .........................................             --        (3.1)          --        (5.0)
                                                                          ---------------------    ---------------------
         Total after-tax adjustments ...............................           (7.2)       31.4        (18.5)        1.5

GAAP Reported:
Net income .........................................................      $    42.3   $    46.0    $   122.2   $    96.7
                                                                          =====================    =====================

Other Data:
Segment after-tax operating income:
     Annuity (fixed and variable) ..................................      $    35.6   $    (0.3)   $   103.2   $    48.3
     Mutual funds ..................................................           13.7        14.3         34.2        41.6
     Other .........................................................            0.2         0.6          3.3         5.3
Mutual fund assets under management, end of period .................       27,948.7    24,654.1     27,948.7    24,654.1
</TABLE>

(1)   See "Results of Operations by Segment and Adjustments to GAAP Reported Net
      Income" included in this MD&A.

Three Months Ended September 30, 2003 Compared to Three Months Ended
September 30, 2002

      Segment after-tax operating income was $49.5 million, an increase of $34.9
million from the prior year. The variable annuity business increase of $29.4
million in after-tax operating income resulted primarily from Q3 2002 Unlocking,
which did not recur in the current period, and due to better separate account
performance in the current period. In addition to the increase in the variable
annuity business, the fixed annuity after-tax operating income increased 28.1%,
or $6.5 million, due to higher interest spreads and account balance growth as a
result of increased deposits through 2003. Offsetting the increase in segment
after-tax operating income in the annuity businesses was a decrease in the
mutual fund segment's after-tax operating income of 4.2%, or $0.6 million.
Signature Services after-tax operating income decreased $0.3 million, driven by
a decrease in


                                       65
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

management advisory fee revenue. After-tax operating income for Essex, a
distribution subsidiary primarily serving the financial institution channel,
increased $0.3 million and Signator Investors after-tax operating income
decreased $0.1 million.

      Revenues increased 9.1%, or $25.9 million, from the prior year period. The
rise in revenue was due to a $31.3 million increase in net investment income,
partially offset by a $6.5 million decrease in premiums, in the fixed annuity
business. The increase in net investment income was primarily due to increases
in invested assets backing fixed annuity products, partially offset by lower
earned yields in the portfolio. Average invested assets backing fixed annuity
products increased 30.3% to $10,777.4 million while the average investment yield
decreased 53 basis points from the prior year. These increases in revenue were
partially offset by a decrease in premium revenue of $6.5 million related to
lower sales of single premium immediate annuities. In addition to the decrease
in premium revenue, investment management revenues decreased 0.3%, or $0.3
million, primarily from the lower service fee in Signature Services driven by a
reduction in the number of open accounts compared to the prior year.
Investment-type product fees decreased $0.7 million primarily in the variable
annuity business on lower surrender fees driven by improved lapse rates. For
variable annuities the mortality and expense fees as a percentage of average
account balances were 1.30% and 1.34% for the current and prior year periods.

      Investment management revenues, commissions, and other fees decreased
0.2%, or $0.2 million, from the prior year. Average mutual fund assets under
management were $27,746.6 million, an increase of $2,305.9 million, or 9.1%,
from the prior year period. The increase in average mutual fund assets under
management was primarily due to market appreciation of $479.6 million during the
quarter, as compared to market depreciation of $1,774.6 million in the prior
year period. Ending mutual fund assets under management increased by $3,294.6
million or 13.4% from the prior year period primarily due to $3,051.9 million in
market appreciation since September 30, 2002. The mutual fund business
experienced net redemptions of $2.4 million during the third quarter of 2003
compared to net deposits of $273.1 million in the prior year, a change of $275.5
million. This change was primarily due to a decrease in deposits of $303.1
million, partially offset by an increase in redemptions of $20.9 million. The
decrease in deposits was primarily due to a decline in institutional advisory
account sales of $303.3 million. Prior year results included the acquisition of
two large advisory accounts. Investment advisory fees increased 10.0%, or $3.6
million, to $38.9 million, from the prior period and were 0.56% of average
mutual fund assets under management for the three months ended September 30,
2003 and 2002. Underwriting and distribution fees decreased 5.8%, or $2.8
million, to $45.4 million compared to the prior year period. Asset based 12b-1
fees declined by $0.8 million due to a decrease in eligible assets under
management compared to the comparable quarter. Commission revenue declined by
$2.0 million, primarily due to a decrease in B-share redemptions and a decline
in the effective rate of its related fees. Shareholder service and other fees
were $13.9 million compared to $10.4 million in the prior year.

      Benefits and expenses decreased 10.0%, or $26.2 million, from the prior
year period. Benefits to policyholders increased 5.56%, or $6.7 million,
primarily due to a $15.4 million increase in interest credited on fixed annuity
account balances due to higher average account balances offset by a $5.6 million
decrease in reserve provisions for life-contingent immediate fixed annuity fund
values. Partially offsetting the increase in benefits to policyholders was a
decline in amortization of deferred policy acquisition costs of 62.0%, or $41.5
million, from the prior year period. This was primarily due to the Q3 2002
Unlocking which resulted in $36.1 million additional amortization of deferred
policy acquisition costs. Also contributing to the decrease in the amortization
of deferred policy acquisition cost is the decrease in the variable annuity
business driven by the strong separate account performance in the current
quarter. The Segment's effective tax rate on operating income was 33.7% and
35.7% for the three months ended September 30, 2003 and 2002.

Nine Months Ended September 30, 2003 Compared to Nine Months Ended
September 30, 2002

      Segment after-tax operating income was $140.7 million, an increase of
47.8%, or $45.5 million from the prior year period. Fixed annuity after-tax
operating income increased 40.1%, or $24.2 million, from September 30, 2002. The
fixed annuity business grew due to higher interest spreads on higher account
balances due to growth. The variable annuity business after-tax operating income
increased $30.7 million to $18.5 million for the nine month period ended
September 30, 2003 compared to the prior year. The variable annuity business
increase resulted primarily from the Q3 2002 Unlocking which did not recur in
the current period. Mutual fund business after-tax operating income declined
17.8%, or $7.4 million, primarily due to a 12.3%, or $29.2 million, decrease in
management advisory fees, partially offset by a 29.2%, or $20.0 million decrease
in commissions. Signature Services after-tax operating income decreased $0.4
million to $2.0 million, driven by a decrease in management advisory fees
revenue. After-tax operating income for Essex, a distribution subsidiary
primarily serving the financial institution channel, decreased $1.5 million from
$1.5 million in the prior year. Signator Investors after-tax operating income
decreased $0.1 million.

      Revenues increased 8.9%, or $75.8 million, from the prior year. The rise
in revenue was due to a $103.2 million increase in net investment income and a
$14.6 million increase in premiums, driven by the fixed annuity business. The
increase in net investment income was primarily due to increases in invested
assets backing fixed annuity products, partially offset by lower earned yields
in the portfolio. Average invested assets backing fixed annuity products
increased 34.1% to $10,055.8 million and the average investment yield decreased
66 basis points from the prior year. These increases in revenue were partially
offset


                                       66
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

by a decrease in investment management revenues, primarily from the mutual fund
business, of 12.4%, or $40.3 million, and a $3.1 million decrease in
investment-type product fees, primarily in the variable annuity business on
lower average fund values. Investment-type product fees decreased mostly due to
a decline in the average variable annuity fund values of 6.1%, or $349.9
million, to $5,382.5 million from the prior year period. The decrease in average
account values was due to poor long-term separate account returns in the prior
year. For variable annuities the mortality and expense fees as a percentage of
average account balances were 1.30% and 1.35% for the current and prior year
periods.

      Investment management revenues, commissions, and other fees decreased
12.4%, or $40.3 million from the prior year. Average mutual fund assets under
management were $26,673.2 million, a decrease of $653.8 million, or 2.4% from
the prior year period. The decrease in average mutual fund assets under
management is primarily due to a lower beginning asset under management balance
compared to September 30, 2002 and is offset by market appreciation. Ending
mutual fund assets under management increased by $3,294.6 million or 13.4% from
the prior year period primarily due to $3,051.9 million in market appreciation
since September 30, 2002. The mutual fund business experienced net redemptions
of $249.5 million during the first nine months of 2003, as compared to net
redemptions of $390.7 million in the prior year, a change of $141.2 million.
This change was primarily due to an increase in deposits of $404.5 million
offset by an increase in redemptions of $297.6 million. The increase in deposits
was driven by the increase in closed-end fund sales, which increased from $622.2
million to $1.4 billion. Current year results included $299.6 million in
deposits from the sale of the John Hancock Preferred Income II Fund and $1.1
billion in deposits from the sale of the John Hancock Preferred Income III Fund.
Prior year sales included $622.2 million in deposits from the sale of the first
John Hancock Preferred Income Fund. The increase in closed-end fund sales was
partially offset by a $302.1 million decrease in institutional advisory account
sales. The increase in redemptions was primarily due to a $700 million
redemption from the John Hancock Variable Series Trust Active Bond account.
Offsetting this increase was a decline in retail mutual fund redemptions of
$413.7 million, with decreases across a number of funds. Investment advisory
fees decreased 6.7%, or $7.8 million, to $109.1 million, from the prior period
and were 0.55% and 0.57% of average mutual fund assets under management for the
nine months ended September 30, 2003 and 2002, respectively. Underwriting and
distribution fees decreased 17.6%, or $28.4 million, to $133.3 million compared
to the prior year period. Asset based 12b-1 fees declined by $14.9 million due
to a decrease in eligible assets under management compared to the prior year.
Commission revenue declined by $13.5 million primarily due to lower
commissionable sales due to increased wrap account sales and a decrease in CDSC
income. Shareholder service and other fees were $42.9 million compared to $32.4
million in the prior year.

      Benefits and expenses increased 1.2%, or $8.7 million from the prior year
period. Benefits to policyholders increased 18.1%, or $58.5 million, primarily
due to a $41.1 million increase in interest credited on fixed annuity account
balances and $19.5 million higher reserve provisions for life-contingent
immediate fixed annuity fund values on higher sales of these contract types.
Partially offsetting the increase in benefits to policyholders was a decline in
commissions expense of 16.4% or $34.7 million, from the prior year period,
primarily due to lower expenses in the mutual fund business. Amortization of
deferred policy acquisition costs decreased 33.2%, or $38.9 million, from the
prior year. This decrease was driven by the $36.1 million Q3 2002 Unlocking of
the DAC asset previously mentioned and also lower variable annuity amortization
partially offset by higher fixed annuity amortization driven by account balance
growth. The Segment's effective tax rate on operating income was 32.2% for the
nine months ended September 30, 2003 and 2002.


                                       67
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Guaranteed and Structured Financial Products Segment

      The following table presents certain summary financial data relating to
the Guaranteed and Structured Financial Products Segment for the periods
indicated.

<TABLE>
<CAPTION>
                                                                 Three Months Ended     Nine Months Ended
                                                                   September 30,          September 30,
                                                                  2003       2002        2003       2002
                                                               --------------------------------------------
                                                                                      (in millions)
<S>                                                            <C>         <C>         <C>         <C>
Operating Results:
Revenues
    Premiums ...............................................   $  109.4    $   32.9    $  205.8    $  268.8
    Investment-type product fees ...........................       15.6        14.6        45.1        44.8
    Net investment income ..................................      403.5       431.0     1,251.1     1,283.6
    Other revenue ..........................................        0.5         0.2         0.9         0.6
                                                               --------------------    --------------------
        Total revenues .....................................      529.0       478.7     1,502.9     1,597.8

Benefits and expenses
    Benefits to policyholders ..............................      392.9       342.1     1,066.8     1,195.0
    Other operating costs and expenses .....................       23.4        13.0        61.5        48.3
    Amortization of deferred policy acquisition costs,
      excluding amounts related to net realized
      investment and other gains (losses) ..................        0.5         0.5         1.6         1.6
    Dividends ..............................................        8.8        10.8        26.3        28.3
                                                               --------------------    --------------------
        Total benefits and expenses ........................      425.6       366.4     1,156.2     1,273.2

Segment pre-tax operating income (1) .......................      103.4       112.3       346.7       324.6
Income taxes ...............................................       33.1        36.4       109.7       105.9
                                                               --------------------    --------------------

Segment after-tax operating income (1) .....................       70.3        75.9       237.0       218.7

After-tax adjustments: (1)
    Net realized investment and other gains (losses), net ..      (26.7)      (47.4)     (105.7)     (116.8)
    Restructuring charges ..................................         --          --          --        (0.5)
                                                               --------------------    --------------------
        Total after-tax adjustments ........................      (26.7)      (47.4)     (105.7)     (117.3)

GAAP Reported:
Net income .................................................   $   43.6    $   28.5    $  131.3    $  101.4
                                                               ====================    ====================

Other Data:
Segment after-tax operating income:
    Spread-based products ..................................   $   67.5    $   69.0    $  224.6    $  200.4
    Fee-based products .....................................        2.8         6.9        12.4        18.3
</TABLE>

(1)   See "Results of Operations by Segment and Adjustments to GAAP Reported Net
      Income" included in this MD&A.

Three Months Ended September 30, 2003 Compared to Three Months Ended
September 30, 2002

      Segment after-tax operating income decreased 7.4% or $5.6 million from the
prior year. Spread-based products after-tax operating income decreased 2.2% or
$1.5 million, which was attributable to a decrease in investment spreads of 2.0%
or $2.1 million. The decline in investment spreads was a result of a 17 basis
point decrease in the interest rate margin, partially offset by a higher average
invested asset base, which increased 7.6% or $1.8 billion over the prior year.
On a total company basis, GICs and funding agreements accounted for 20.9% of
after-tax operating income compared to 26.1% in the prior year. Fee-based
products after-tax operating income decreased 59.4% or $4.1 million. This
decline is due primarily to higher taxes, combined with lower general account
risk charges and lower earnings on capital.

      Revenues increased 10.5% or $50.3 million from the prior year, primarily
as a result of higher premiums. Premiums increased 232.5% or $76.5 million,
primarily as a result of increased structured settlement sales. Investment-type
product fees


                                       68
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

increased 6.8% or $1.0 million, primarily due to higher structured settlement
sales. Net investment income decreased 6.4%, or $27.5 million, despite the
growth in the spread-based average invested assets. The average yield on
invested assets decreased to 5.47%, reflecting the lower interest rate
environment in the current period. Net investment income varies with market
interest rates as the return on approximately $11 billion, or 42%, of the asset
portfolio, floats with market rates. Matching the interest rate exposure on our
asset portfolio to the exposure on our liabilities is a central feature of our
asset/liability management process.

      Benefits and expenses increased 16.2% or $59.2 million from the prior
year, primarily due to higher benefits to policyholders. Benefits to
policyholders on spread-based products increased 18.8% or $55.5 million
primarily due to a increase in sales of structured settlements, partially offset
by lower interest credited on account balances. Spread-based interest credited
decreased 8.0% or $21.9 million. The decrease in interest credited was due to a
decline in the average interest credited rate on account balances for
spread-based products, as approximately $11 billion of liabilities with floating
rates reset. The average crediting rate fell to 4.22%. Other operating costs and
expenses increased 80.0%, or $10.4 million, reflecting higher commissions,
combined with higher compensation expenses. Dividends to contractholders
declined 18.5% or $2.0 million from the prior year. The segment's effective tax
rate on operating income was 32.0% compared to 32.4% for the prior year.

Nine Months Ended September 30, 2003 Compared to Nine Months Ended
September 30, 2002

      Segment after-tax operating income increased 8.4% or $18.3 million from
the prior year. Spread-based products after-tax operating income increased 12.1%
or $24.2 million, which was attributable to an increase in investment spreads of
9.3% or $28.2 million from the prior year. The growth in investment spreads was
a result of a higher average invested asset base, which increased 10.1% or $2.3
billion over the prior year, partially offset by a 5 basis point decline in the
interest rate margin. On a total company basis, GICs and funding agreements
accounted for 23.0% of after-tax operating income compared to 23.8% in the prior
year. Fee-based products after-tax operating income decreased 32.2% or $5.9
million from the prior year. This decline is due primarily to higher taxes,
combined with lower general account risk charges and lower earnings on capital.

      Revenues decreased 5.9% or $94.9 million from the prior year, driven by
lower premiums and a decline in net investment income. Premiums declined 23.4%
or $63.0 million from the prior year, primarily as a result of lower group
annuity product sales. Net investment income decreased 2.5% or $32.5 million,
despite the growth in the spread-based average invested assets. The average
yield on invested assets decreased to 5.82%, reflecting the lower interest rate
environment in the current period. Net investment income varies with market
interest rates as the return on approximately $11 billion, or 42% of the asset
portfolio, floats with market rates. Matching the interest rate exposure on our
asset portfolio to the exposure on our liabilities is a central feature of our
asset/liability management process. Investment-type product fees increased 0.7%
or $0.3 million from the prior year, primarily due to higher structured
settlement sales.

      Benefits and expenses decreased 9.2% or $117.0 million from the prior
year. The decrease was largely due to lower benefits to policyholders, partially
offset by an increase in operating costs and expenses. Benefits to policyholders
on spread-based products decreased 11.0% or $115.4 million primarily due to a
decrease in sales of single premium group annuity contracts combined with lower
interest credited on account balances. Spread-based interest credited decreased
5.8% or $47.3 million from the prior year. The decrease in interest credited was
due to a decline in the average interest credited rate on account balances for
spread-based products, as approximately $11 billion of liabilities with floating
rates reset. The average crediting rate fell to 4.35%. Partially offsetting this
decrease was an increase in other operating costs and expenses of 27.3% or $13.2
million from the prior year. The increase was primarily due to higher pension
and compensation costs partially offset by lower commissions. Dividends to
contractholders declined 7.1% or $2.0 million from the prior year. The segment's
effective tax rate on operating income was 31.6% compared to 32.6% for the prior
year.


                                       69
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Investment Management Segment

      The following table presents certain summary financial data relating to
the Investment Management Segment for the periods indicated.

<TABLE>
<CAPTION>
                                                                 Three Months Ended        Nine Months Ended
                                                                    September 30,            September 30,
                                                                 2003          2002        2003         2002
                                                               -----------------------------------------------
                                                                                  (in millions)
<S>                                                            <C>          <C>          <C>         <C>
Operating Results:
Revenues
    Net investment income ..................................   $     2.7    $     3.3    $    14.4   $    10.9
    Net realized investment and other
       gains (losses) (1) ..................................        (0.7)         0.9          8.9         1.9
    Investment management revenues, commissions and
       other fees ..........................................        29.9         26.3         84.3        81.6
    Other revenue ..........................................          --           --           --          --
                                                               -----------------------------------------------
          Total revenues ...................................        31.9         30.5        107.6        94.4

Benefits and expenses
    Other operating costs and expenses .....................        23.3         22.2         71.1        66.8
                                                               -----------------------------------------------
          Total benefits and expenses ......................        23.3         22.2         71.1        66.8

Segment pre-tax operating income (1) .......................         8.6          8.3         36.5        27.6
Income taxes ...............................................         3.0          3.8         13.8        10.8
                                                               -----------------------------------------------

Segment after-tax operating income (1) .....................         5.6          4.5         22.7        16.8

After-tax adjustments: (1)
    Net realized investment and other
       gains (losses) (1) ..................................          --         (0.1)          --         0.4
    Restructuring charges ..................................          --           --           --        (0.2)
                                                               -----------------------------------------------
          Total after-tax adjustments ......................          --         (0.1)          --         0.2

GAAP Reported:
Net income .................................................   $     5.6    $     4.4    $    22.7   $    17.0
                                                               ===============================================

Other Data:
    Segment assets under management, end
      of period (2) ........................................   $29,055.0    $25,878.3    $29,055.0   $25,878.3
</TABLE>

(1)   See "Results of Operations by Segment and Adjustments to GAAP Reported Net
      Income" included in this MD&A.
(2)   Includes general account cash and invested assets of $386.6 million and
      $343.1 million at September 30, 2003 and 2002, respectively.

Three Months Ended September 30, 2003 Compared to Three Months Ended
September 30, 2002

         Segment after-tax operating income increased $1.1 million, or 24.4%,
from the prior year quarter. The increase was primarily due to $3.6 million in
higher investment management revenues, commissions and other fees, partially
offset by $1.6 million in lower net realized and other investment gains
(losses), $0.6 million in lower net investment income and $1.1 million in higher
operating expenses.

      Revenues increased $1.4 million, or 4.6%, from the prior year quarter. Net
realized investment gains on mortgage securitizations decreased $1.7 million, to
a loss of $0.8 million, from a gain of $0.9 million in the prior year quarter at
John Hancock Real Estate Finance. Net realized investment and other losses of
$0.7 million in the current period are the result of SFAS No. 133 accounting on
mortgages committed and held for sale. Net investment income was down $0.6
million, primarily resulting from lower income earned on a lower average amount
of mortgages held for sale. Investment management revenues, commissions, and
other fees increased $3.6 million, or 13.7%, from the prior year quarter. Fee
income increased $2.6 million in the current quarter at the Company's Bond and
Corporate Finance Group primarily from its


                                       70
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

general partnership investment in private equity funds. Fee income increased
$2.3 million at the Hancock Natural Resource Group from a $1.9 million increase
in property management fees at the new northwest property management division
established in December of 2002, and $0.4 million in higher investment
management fees on higher assets under management in the current quarter. One of
the Hancock Natural Resource Group's strategies is to vertically integrate the
timber business and the establishment of the northwest property management
division is another step taken to implement that strategy. Commercial mortgage
origination fees at John Hancock Real Estate Finance increased $0.6 million from
higher loan originations for the Company's General Account. Advisory fees at the
Company's institutional investment advisor, the Independence group of companies
(Independence) increased $0.2 million, or 1.5%. Average assets under management
in the current quarter at Independence increased $2.0 billion, or 11.0% compared
to the prior year quarter, including a continuing shift towards fixed income
assets which have lower fee rates. These increases in fee revenue were offset by
a decrease in fee income of $2.2 million at John Hancock Realty Advisors mostly
due to lower acquisition activity. Investment management revenue, commissions
and other fees were 0.41% and 0.40% of average advisory assets under management
for the current and prior year quarters, respectively.

      Total benefits and expenses increased $1.1 million, or 5.0%, from the
prior year quarter. Operating expenses increased $1.1 million, or 5.0%.
Operating expenses at the Hancock Natural Resource Group increased $1.3 million,
or 27.1%, including $1.2 million of expenses associated with the new northwest
property management division established in December of 2002. One of the Hancock
Natural Resource Group's strategies is to vertically integrate the timber
business and the establishment of the northwest property management division is
another step taken to implement that strategy. Operating expenses at
Independence increased $1.2 million, or 10.9%, based on $1.0 million of
increased incentive compensation expenses and $0.4 million of increased
severance costs associated with the closing down of the high net worth
management group offset by savings from ongoing cost reduction efforts. These
increases were partially offset by a decrease in operating expenses of $0.6
million, or 20.7%, at the Company's Bond and Corporate Finance Group due to
lower corporate expense allocations based on lower assets under management, a
decrease of $0.6 million, or 50.0%, at John Hancock Realty Advisors mostly on
lower acquisition activity, and a decrease of $0.2 million, or 8.7%, at John
Hancock Real Estate Finance mainly from lower incentive compensation expenses.
Operating expenses were 0.32% and 0.33% of average advisory assets under
management for the current and prior year quarters, respectively. Commission
expenses at the Hancock Natural Resource Group were unchanged at $0.1 million in
both the current and prior year quarters.

      The Segment's effective tax rate on operating income fell to 34.9% from
45.8% for the prior year quarter, primarily due to a one time adjustment in the
prior year quarter for 2001 taxes. The effective tax rate for the Investment
Management Segment remains higher than for our other U.S.-based business
operating segments due to state taxes on certain investment management
subsidiaries, and reduced tax benefits from portfolio holdings in this segment.

Nine Months Ended September 30, 2003 Compared to Nine Months Ended
September 30, 2002

      Segment after-tax operating income increased $5.9 million, or 35.1%, from
the prior year. The increase was primarily due to $7.0 million in higher net
realized investment gains, mainly on mortgage securitizations, $3.5 million in
higher net investment income, $2.7 million of higher fee income and $1.0 million
in lower sales commission expenses, partially offset by $5.3 million in higher
operating expenses.

      Revenues increased $13.2 million, or 14.0%, from the prior year. Net
realized investment gains increased $7.0 million, to a gain of $8.9 million,
primarily from mortgage securitizations at John Hancock Real Estate Finance
where realized gains increased $6.8 million, to a gain of $8.7 million, from a
gain of $1.9 million in the prior year. This increase in securitization gains
resulted from higher profitability on a higher volume of securitizations in the
current year compared to the prior year. Net investment income increased $3.5
million, to $14.4 million, from $10.9 million in the prior year, primarily
resulting from increases in equity method income of $3.9 million on limited
partnership energy investments at John Hancock Energy Resources Management due
to the required adoption of fair value accounting at the limited partnership.
Investment management revenues, commissions, and other fees increased $2.7
million, or 3.3%, from the prior year. The Hancock Natural Resources Group's
property management fee revenue increased $5.1 million from the new northwest
property management division established in December of 2002 and $1.4 million in
higher management fee income on higher assets under management in the current
year. One of the Hancock Natural Resource Group's strategies is to vertically
integrate the timber business and the establishment of the northwest property
management division is another step taken to implement that strategy. Fee income
increased $1.0 million in the current year at the Company's Bond and Corporate
Finance Group from increases of $3.3 million primarily from its general
partnership investment in private equity funds offset by $2.3 million in lower
fees on CBO and mezzanine funds. Fee income increased $0.6 million at John
Hancock Real Estate Finance primarily from a higher volume of loans originated
for the Company's General Account. At the Company's institutional advisor, the
Independence group of companies (Independence), advisory fees were down $3.6
million, or 8.6%, from the prior year. The lower fees at Independence, on $0.5
billion in higher average assets under management reflect a shift towards fixed
income assets which have lower fee rates. Fee revenue at John Hancock Realty
Advisors declined $1.9 million, or 26.8%, primarily from a decrease of $2.4
million in acquisition fees offset by higher management fees of $0.6 million in
the current year. Investment management revenue,


                                       71
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

commissions and other fees were 0.40% and 0.39% of average advisory assets under
management for the current and prior year periods, respectively.

      Total benefits and expenses increased $4.3 million, or 6.4%, from the
prior year. Operating expenses increased $5.3 million, or 8.1%, from the prior
year. The increase was primarily due to an increase of $5.2 million, or 38.5% in
operating expenses at the Hancock Natural Resource Group, which included $3.1
million of expenses associated with the new northwest property management
division established in December of 2002 and $2.4 million of increased incentive
compensation expenses offset by operating expense savings, primarily due to
ongoing cost reduction efforts. One of the Hancock Natural Resource Group's
strategies is to vertically integrate the timber business and the establishment
of the northwest property management division is another step taken to implement
that strategy. Operating expenses at Independence increased $1.8 million, or
5.2%, resulting from increased incentive compensation expense, severance costs
associated with the closing down of the high net worth management group and
non-recurring prior year reductions, offset by operating expense savings from
ongoing cost reduction efforts. Operating expenses at John Hancock Realty
Advisors decreased $1.0 million, or 32.3%, due primarily to lower acquisition
expenses in the current year. Operating expenses at the other investment
management business units declined $0.7 million, or 5.0%, from the prior year.
Operating expenses were 0.33% and 0.31% of average advisory assets under
management for the current and prior year periods, respectively. Commission
expenses at the Hancock Natural Resource Group declined $1.0 million, from $1.3
million in the prior year, based on significant new timberland investors signed
in the prior year.

      The Segment's effective tax rate on operating income fell to 37.8% from
39.1% for the prior year, primarily due to a one time adjustment in the prior
year for 2001 taxes. The effective tax rate for the Investment Management
Segment remains higher than for our other U.S.-based business operating segments
due to state taxes on certain investment management subsidiaries, and reduced
tax benefits from portfolio holdings in this segment.


                                       72
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Maritime Life Segment

      In the first quarter of 2003, the Company implemented organizational
changes within the Corporate and Other Segment which resulted in reporting the
Maritime Life business as its own operating segment for the first time. The
Maritime Life Segment consists of our consolidated Canadian operations,
principally those of our Canadian life insurance business, The Maritime Life
Assurance Company (Maritime Life). The reclassifications associated with the
realignment of our operating segments had no impact on segment after-tax
operating income, or net income of the Maritime Life, or Corporate and Other
Segments, other than to display these businesses separately. The following table
presents certain summary financial data relating to the Maritime Life Segment
for the periods indicated.

<TABLE>
<CAPTION>
                                                                       Three Months Ended        Nine Months Ended
                                                                          September 30,            September 30,
                                                                         2003       2002          2003       2002
                                                                     -------------------------------------------------
                                                                                      (in millions)
<S>                                                                 <C>         <C>         <C>         <C>
Operating Results:
Revenues
    Premiums ....................................................   $  318.1    $  170.9    $  771.8    $  507.3
    Investment-type product fees ................................       46.2        49.6       139.5       140.4
    Net investment income .......................................       96.1        78.9       276.5       234.3
    Investment management revenues, commissions
      and other fees ............................................        9.9         5.4        23.0        15.0
    Other revenue ...............................................        3.5         2.5         8.9        10.4
                                                                    --------------------    --------------------
        Total revenues ..........................................      473.8       307.3     1,219.7       907.4

Benefits and expenses
    Benefits to policyholders ...................................      335.7       211.4       855.8       607.6
    Other operating costs and expenses ..........................       98.7        43.8       246.9       173.6
    Amortization of deferred policy acquisition costs,
      excluding amounts related to net realized investment
      and other gains (losses) ..................................       (1.6)       11.0         5.5        28.9
    Dividends to policyholders ..................................        4.7         3.6        13.0        10.8
                                                                    --------------------    --------------------
        Total benefits and expenses .............................      437.5       269.8     1,121.2       820.9

Segment pre-tax operating income (1) ............................       36.3        37.5        98.5        86.5
Income taxes ....................................................       13.2        13.0        35.8        30.0
                                                                    --------------------    --------------------

Segment after-tax operating income (1) ..........................       23.1        24.5        62.7        56.5

After-tax adjustments: (1)
    Net realized investment and other gains (losses), net .......        4.2        (1.2)        9.7       (12.4)
    Restructuring charges .......................................         --          --          --        (0.4)
                                                                    --------------------    --------------------
        Total after-tax adjustments .............................        4.2        (1.2)        9.7       (12.8)

GAAP Reported:
Net income ......................................................   $   27.3    $   23.3    $   72.4    $   43.7
                                                                    ====================    ====================

Other Data:
Segment after-tax operating income: (1)
    Canadian protection .........................................   $   11.8    $   11.6    $   31.6    $   29.2
    Canadian asset gathering ....................................        3.3         8.8        15.2        14.9
    Canadian group life & health ................................        8.7         5.5        18.4        16.2
    Canadian corporate & other ..................................       (0.7)       (1.4)       (2.5)       (3.8)
</TABLE>

(1)   See "Results of Operations by Segment and Adjustments to GAAP Reported Net
      Income" included in this MD&A.


                                       73
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Three Months Ended September 30, 2003 Compared to Three Months Ended
September 30, 2002

      Segment after-tax operating income was $23.1 million, a decrease of 5.7%,
or $1.4 million, from the prior year. Underlying this segment's results was a
general strengthening of the Canadian dollar, increasing operating income by
$3.2 million. The acquisition, effective July 1, 2003, of certain Canadian
individual disability and group life and health business from Liberty Mutual
(See Transactions Affecting Comparability of Results of Operations elsewhere in
this MD&A) increased earnings by $6.3 million for the period. The group life
and health business increased $5.8 million due to $2.5 million in core earnings
contributed by the acquired business, an additional $1.5 million of growth
resulted from pricing increases implemented in late 2002 and $2.8 million from
release of long term disability product reserves, partially offset by a $1.0
million long term disability experience loss. The retail protection business
earnings increased by $2.5 million, or 15.2%, primarily reflecting $1.9 million
incremental core earnings from the acquired individual disability business, $1.5
million of business growth, and $2.0 million from universal life mortality and
lapse adjustments, partially offset by experience factors driving a decrease of
$2.9 million. The asset gathering business results decreased $9.6 million from
the prior year. The business incurred increased DAC amortization of $7.1 million
driven by prior year changes in the DAC valuation process and $2.9 million
driven by poor separate account performance.

      Total revenue increased 54.2%, or $166.5 million, including $41.2 million,
or 13.4%, due to strengthening of the Canadian dollar. Premiums increased 86.1%,
or $147.2 million, with $71.2 million from the acquired business. The group life
& health segment had premiums increase $100.1 million from the prior year,
including $53.2 million from the acquired business, and the recapture
transaction where significant portions of life, accidental death and
dismemberment and long term disability contracts previously reinsured were
reacquired. Premiums for retail protection products increased 149.4%, or $36.6
million, $18.0 million from the acquired individual disability business,
including the existing affinity business, living benefit premium growth,
individual life reinsurance and growth in individual life inforce business.
Premiums in the asset gathering business increased $10.5 million, due to sales
of structured settlements and other immediate annuities. Investment-type product
fees decreased 6.9%, or $3.4 million, from the prior year, driven by a $6.9
million decrease in universal life product charges resulting from slowing sales
in this product line, as a result competitive product design changes have now
been launched. Net investment income increased $17.2 million driven by higher
assets under management. Management advisory fees increased 83.3%, or $4.5
million, from increased administrative services only (ASO) business primarily
resulting from the Liberty Health acquisition.

      Total benefits and expenses increased 62.2%, or $167.7 million, from the
prior year including $38.1 million from the strengthening of the Canadian
dollar. Benefits to policyholders increased 58.8%, or $124.3 million, including
$47.1 million of benefits paid and accrued in the acquired business, $40.7
million of higher group life & health benefits driven by the reinsurance
recapture discussed above, $29.5 million higher individual life benefits driven
by the affinity business, higher surrenders and reinsurance recapture and $7.0
million from increased provisions for future policy benefits in the immediate
annuity business. Operating costs and expenses increased 125.3%, or $54.9
million including $23.0 million as the impact of the acquired business. Higher
expenses include $8.3 million of general operating expenses across all
businesses, $18.0 million of increased DAC amortization driven by prior year
changes in the DAC valuation process. In addition, there were $2.7 million in
lower reinsurance allowances following the group life and health reinsurance
recapture in the first quarter of 2003 and $3.6 million higher commissions
driven by improved new and renewal premiums and deposits. The segment's
effective tax rate on operating income was 36.4% compared to 34.7% for the prior
year.

Nine Months Ended September 30, 2003 Compared to Nine Months Ended
September 30, 2002

      Segment after-tax operating income was $62.7 million, an increase of $6.2
million, or 11.0%, from the prior year. Underlying this improvement in segment
pre-tax operating income was a general strengthening of the Canadian dollar,
which increased operating income $8.6 million and the Liberty Health
acquisition, which increased operating income $6.3 million. The retail
protection business increased 13.6%, or $6.0 million from the prior year, driven
by $4.4 million in foreign exchange translation gains and a $1.9 million
increase in core earnings from the acquired individual disability business,
partially offset by $0.3 million decrease due to experience compared to the
prior year. The group life & health business operating income increased 18.9%,
or $4.6 million, driven primarily by $1.9 million from the acquired business and
foreign exchange translation gains of $2.5 million. The corporate & other
business had an operating loss of $4.2 million, a $1.6 million improvement from
the prior year. The asset gathering business decreased $0.2 million from the
prior year, driven by lower separate account margins and poor pension mortality
experience of $1.4 million and increased DAC amortization of $2.1 million
partially offset by a $3.3 million improvement in net investment income.

      Total revenue increased 34.4%, or $312.3 million, reflecting a $106.1
million, or 11.7%, increase due to strengthening of the Canadian dollar.
Premiums increased $264.5 million, driven by an increase of $197.4 million in
the group life & health business following the previously discussed reinsurance
recapture transactions and including $53.2 million from the acquired


                                       74
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

group business. Premiums in the retail protection business increased $46.3
million, including $18.0 million of acquired individual health business, and
$28.3 million in the existing affinity business, living benefit premium growth,
individual life reinsurance and growth in the individual life inforce business.
Asset gathering premiums increased $20.8 million, or 135.9%, due to sales of
structured settlements and other immediate annuities. Investment-type product
fees decreased $0.9 million from the prior year driven by lower account values
from an increase in lapse rates in segregated funds (separate accounts). Net
investment income increased $42.2 million driven by higher invested assets.
Management advisory fees increased 53.3%, or $8.0 million, from increased
administrative services only (ASO) business, including $3.2 million contributed
through the acquired business.

      Total benefits and expenses increased 36.6%, or $300.3 million, from the
prior year. Underlying this increase in benefits and expenses was a general
strengthening of the Canadian dollar resulting in an increase of 11.9%, or $97.6
million. Benefits to policyholders increased $248.2 million. The group life &
health business accounted for $168.9 million of this increase, primarily due to
the previously discussed reinsurance recapture transaction and the contribution
of $38.3 million from the acquired business. Retail protection products
increased $59.4 million, driven by increased provisions for future policy
benefits on traditional life products and the impact of reinsurance recapture on
claims and $8.8 million from the acquired individual disability business. Higher
annuity reserves accounted for the remaining increase. Operating costs and
expenses increased 42.2%, or $73.3 million. Operating costs of the acquired
business accounted for $23.0 million of the increase from the prior year. Group
life and health operating costs increased $24.8 million primarily reflecting
lower reinsurance allowances, and increased general expenses. The asset
gathering business included an increase of $18.0 million related to prior year
changes in the DAC valuation process. The retail protection business expenses
increased $4.1 million, primarily due to higher employment-related expenses. The
segment's effective tax rate on operating income was 36.3% compared to 34.7% for
the prior year.


                                       75
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Corporate and Other Segment

     The following table presents certain summary financial data relating to the
Corporate and Other Segment for the periods indicated.

<TABLE>
<CAPTION>
                                                                Three Months Ended      Nine Months Ended
                                                                   September 30,           September 30,
                                                                  2003      2002          2003      2002
                                                                 ----------------        ----------------
                                                                               (in millions)
<S>                                                              <C>       <C>           <C>       <C>
Operating Results:
Segment after-tax operating income(1)
   International operations ..................................   $  3.9    $  1.7        $  6.6    $  4.1
   Corporate operations ......................................    (13.1)     (3.5)        (45.5)    (10.1)
   Non-core businesses .......................................      1.1       0.6           2.9       3.6
                                                                 ----------------        ----------------
         Total ...............................................     (8.1)     (1.2)        (36.0)     (2.4)
After-tax adjustments: (1)
   Net realized investment and other gains (losses), net .....     (4.0)      2.0         176.2      (0.1)
   Restructuring charges .....................................       --      (0.3)           --       2.0
   Class action lawsuit ......................................       --        --            --      (0.8)
                                                                 ----------------        ----------------
         Total after-tax adjustments .........................     (4.0)      1.7         176.2       1.1

GAAP Reported:
Net income ...................................................   $(12.1)   $  0.5        $140.2    $ (1.3)
                                                                 ================        ================
</TABLE>

(1)   See "Adjustments to GAAP Reported Net Income" included in this MD&A.
(2)   In 2002, during its start-up phase, the Federal long-term care insurance
      business was reported in the Corporate and Other Segment. Effective
      January 1, 2003, the business and its prior year results were reclassified
      from the Corporate and Other Segment to the Protection Segment.

Three Months Ended September 30, 2003 Compared to Three Months
Ended September 30, 2002

      Segment after-tax operating income from international operations increased
$2.2 million from the prior year. Direct Foreign Operations, which consist of
operations of affiliates in Southeast Asia and China, generated a $1.0 million
improvement compared to the same quarter in 2002. The third quarter of 2003 was
$0.6 million favorable primarily due to foreign currency transaction gains of
$1.0 million better than the pre-tax loss of $0.4 million for the same quarter
ending of 2002. Again, Singapore operations, up $0.7 million, were the major
component of the improvement due to foreign currency transaction gains in 2003
versus foreign currency transaction losses in 2002. Improved operating results
in China, largely due to expense cuts and delayed agency expansion, make up the
rest of the improvement. Our International Group Program's after-tax operating
income of $3.2 million was $1.2 million favorable compared to September 30,
2002. This is due to more earned retention income.

      Segment after-tax operating loss from corporate operations increased $9.6
million from the prior year. Investment income on corporate surplus was $5.5
million favorable due to improved investment income relative to the surplus
requirements in our other business lines. Group life insurance business
operating income was $4.8 million lower reflecting the sale of the group life
business to MetLife effective May 1, 2003. The primary difference for the
remainder is an expense reimbursement in this segment in September 30, 2002 that
resulted from expenses charged to the business units for services fees, accrued
employee incentive compensation and payroll taxes.

      Segment after tax operating income from non-core businesses increased $0.5
million from the prior year because of a lower lapse rate in discontinued
business. We continue with the orderly run-off of business within this group.

Nine Months Ended September 30, 2003 Compared to Nine Months Ended
September 30, 2002

      Segment after-tax operating income from international operations increased
$2.5 million from the prior year. Results from our Direct Foreign Operations,
which consist of operations in Southeast Asia and China, were a $0.6 million
lower loss. Our International Group Program after tax income was $1.9 million
higher due to higher earned retention income.

      Segment after-tax operating loss from corporate operations increased $35.4
million from the prior year. Investment income on corporate surplus was $16.6
million lower due to increased surplus requirements in our other business lines
as a result of the growth of capital intense business. Group Life after-tax
operating income was $5.9 million lower reflecting a sale of the Group Life
business to MetLife effective May 1, 2003. Our corporate owned life insurance
program increased $17.0 million due to an


                                       76
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

increase in the asset base driven by low interest rates which improved the
performance of the separate account assets supporting the program. Other expense
increases in our corporate account were driven by a $15.5 million increase for
net periodic pension costs, a $6.8 million provision for future benefits and
$3.0 million less rent reimbursement due to the sale of the home office.

      Segment after tax operating income from non-core businesses decreased $0.7
million from the prior year. We continue with the orderly run-off of business
within this group.


                                       77
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

General Account Investments

      We manage our general account assets in investment segments that support
specific classes of product liabilities. These investment segments permit us to
implement investment policies that both support the financial characteristics of
the underlying liabilities, and also provide returns on our invested capital.
The investment segments also enable us to gauge the performance and
profitability of our various businesses.

Asset/Liability Risk Management

      Our primary investment objective is to maximize after-tax returns within
acceptable risk parameters. We are exposed to two primary types of investment
risk:

o     Interest rate risk, meaning changes in the market value of fixed maturity
      securities as interest rates change over time, and
o     Credit risk, meaning uncertainties associated with the continued ability
      of an obligor to make timely payments of principal and interest.

      We use a variety of techniques to control interest rate risk in our
portfolio of assets and liabilities. In general, our risk management philosophy
is to limit the net impact of interest rate changes on our assets and
liabilities. Assets are invested predominantly in fixed income securities, and
the asset portfolio is matched with the liabilities so as to eliminate the
Company's exposure to changes in the overall level of interest rates. Each
investment segment holds bonds, mortgages, and other asset types that will
satisfy the projected cash needs of its underlying liabilities. Another
important aspect of our asset-liability management efforts is the use of
interest rate derivatives. We selectively apply derivative instruments, such as
interest rate swaps and futures, to reduce the interest rate risk inherent in
combined portfolios of assets and liabilities. For a more complete discussion of
our interest rate risk management practices, please see the Interest Rate Risk
section in the Quantitative and Qualitative Disclosures about Market Risk
section of this document.

      Management of credit risk is central to our business and we devote
considerable resources to the credit analysis underlying each investment
acquisition. Our corporate bond management group includes a staff of highly
specialized, experienced, and well-trained credit analysts. We rely on these
analysts' ability to analyze complex private financing transactions and to
acquire the investments needed to profitably fund our liability requirements. In
addition, when investing in private fixed maturity securities, we rely upon
broad access to proprietary management information, negotiated protective
covenants, call protection features and collateral protection.

      Our bond portfolio is reviewed on a continuous basis to assess the
integrity of current quality ratings. As circumstances warrant, specific
investments are "re-rated" with the adjusted quality ratings reflected in our
investment system. All bonds are evaluated regularly against the following
criteria:

o     material declines in the issuer's revenues or margins;
o     significant management or organizational changes;
o     significant uncertainty regarding the issuer's industry;
o     debt service coverage or cash flow ratios that fall below
      industry-specific thresholds;
o     violation of financial covenants; and
o     other business factors that relate to the issuer.

      Insurance product prices are impacted by investment results as well as
other results (e.g. mortality lapse). Accordingly, incorporated in insurance
products prices are assumptions of expected default losses over the long-term.
Actual losses therefore vary above and below this average, and the market value
of the portfolio as a whole also changes as market credit spreads move up and
down during an economic cycle.

      John Hancock is able to hold to this investment strategy over the long
term, both because of its strong capital position, the fixed nature of its
liabilities and the matching of those liabilities with assets, and because of
the experience gained through many decades of a consistent investment
philosophy. We generally intend to hold all of our fixed maturity investments to
maturity to meet liability payments, and to ride out any unrealized gains and
losses over the long term. However, we do sell bonds under certain
circumstances, such as when new information causes us to change our assessment
of whether a bond will recover or perform according to its contractual terms, in
response to external events (such as a merger or a downgrade) that result in
investment guideline violations (such as single issuer or overall portfolio
credit quality limits), in response to extreme catastrophic events (such as
September 11, 2001) that result in industry or market wide disruption, or to
take advantage of tender offers.


                                       78
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Overall Composition of the General Account

      Invested assets, excluding separate accounts, totaled $75.2 billion and
$67.1 billion as of September 30, 2003 and December 31, 2002, respectively.
Although the portfolio composition has not significantly changed at September
30, 2003 as compared to December 31, 2002, invested assets have grown 12.0% over
the year, with the fixed maturity securities increasing $6.7 billion. The
following table shows the composition of investments in the general account
portfolio.

<TABLE>
<CAPTION>
                                                 As of September 30,            As of December 31,
                                                         2003                          2002
                                            ------------------------------------------------------------
                                                Carrying         % of          Carrying         % of
                                                  Value          Total          Value           Total
                                            ------------------------------------------------------------
                                              (in millions)
<S>                                             <C>             <C>         <C>                <C>
Fixed maturity securities (1)............       $54,283.7        72.2%      $ 47,598.4          70.9%
Mortgage loans (2).......................        12,534.9        16.7         11,805.7          17.6
Real estate..............................           263.8         0.4            318.6           0.5
Policy loans (3).........................         2,107.8         2.8          2,097.2           3.1
Equity securities........................         1,171.2         1.6            968.6           1.4
Other invested assets (4)................         3,109.0         4.1          2,937.8           4.4
Short-term investments...................            92.2         0.1            211.2           0.3
Cash and cash equivalents (5)............         1,590.0         2.1          1,190.6           1.8
                                            ------------------------------------------------------------
       Total invested assets.............       $75,152.6       100.0%      $ 67,128.1         100.0%
                                            ============================================================
</TABLE>

(1)   In addition to bonds, the fixed maturity security portfolio contains
      redeemable preferred stock with a carrying value of $547.2 million and
      $593.3 million as of September 30, 2003 and December 31, 2002,
      respectively. The total fair value of the fixed maturity security
      portfolio was $54,309.4 million and $47,648.0 million, at September 30,
      2003 and December 31, 2002 respectively.
(2)   The fair value for the mortgage loan portfolio was $13,590.3 million and
      $12,726.1 million as of September 30, 2003 and December 31, 2002,
      respectively.
(3)   Policy loans are secured by the cash value of the underlying life
      insurance policies and do not mature in a conventional sense, but expire
      in conjunction with the related policy liabilities.
(4)   Other invested assets as of December 31, 2002 contains a receivable of
      $471.1 million from Allmerica Financial Corporation pursuant to the
      Company's agreement to reinsure Allmerica's fixed universal life insurance
      business. At September 30, 2003, the acquisition accounting was finalized
      and these assets are reflected in the proper line items in the portfolio
      detail above.
(5)   Cash and cash equivalents are included in total invested assets in the
      table above for the purposes of calculating yields on the income producing
      assets for the Company.

      Consistent with the nature of the Company's product liabilities, assets
are heavily oriented toward fixed maturity securities. The Company determines
the allocation of assets primarily on the basis of cash flow and return
requirements of its products and by the level of investment risk.

      Fixed Maturity Securities. The fixed maturity securities portfolio is
predominantly comprised of low risk, investment grade, publicly and privately
traded corporate bonds and senior tranches of asset-backed securities (ABS) and
mortgage-backed securities (MBS). The fixed maturity securities portfolio also
includes redeemable preferred stock. As of September 30, 2003, fixed maturity
securities represented 72.2% of general account invested assets with a carrying
value of $54.3 billion, comprised of 54.5% public securities and 45.5% private
securities. Each year, the Company directs the majority of net cash inflows into
investment grade fixed maturity securities. Typically, between 5% and 15% of
funds allocated to fixed maturity securities are invested in
below-investment-grade bonds while maintaining a policy to limit the overall
level of these bonds to no more than 10% of invested assets and the majority of
that balance in the BB category. As of September 30, 2003, the below investment
grade bonds were 7.8% of invested assets, and 10.7% of total fixed maturities.
The Company has established a long-term target of limiting investments in below
investment grade bonds to 9% and 8% of invested assets by year end 2004 and 2005
for its U.S. life insurance companies on a statutory accounting basis.
Allocations are based on an assessment of relative value and the likelihood of
enhancing risk-adjusted portfolio returns. While the Company has profited from
the below-investment-grade asset class in the past, care is taken to manage its
growth strategically by limiting its size relative to the Company's total
assets.

      The Securities Valuation Office (SVO) of the National Association of
Insurance Commissioners evaluates all public and private bonds purchased as
investments by insurance companies. The SVO assigns one of six investment
categories to each security it reviews. Category 1 is the highest quality
rating, and Category 6 is the lowest. Categories 1 and 2 are the equivalent


                                       79
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

of investment grade debt as defined by rating agencies such as S&P and Moody's
(i.e., BBB /Baa3 or higher), while Categories 3-6 are the equivalent of
below-investment grade securities. SVO ratings are reviewed and may be revised
at least once a year.

      The following table shows the composition by credit quality of the fixed
maturity securities portfolio.

                 Fixed Maturity Securities -- By Credit Quality

<TABLE>
<CAPTION>
                                             ---------------------------------------------------------------
                                                   As of September 30,            As of December 31,
                                                          2003                           2002
                                             ---------------------------------------------------------------
   SVO              S&P Equivalent               Carrying          % of         Carrying          % of
Rating (1)          Designation (2)            Value (3)(4)(5)     Total      Value (3)(4)(5)     Total
------------------------------------------------------------------------------------------------------------
                                               (in millions)                  (in millions)
    <S>      <C>                                  <C>              <C>           <C>               <C>
    1        AAA/AA/A.......................      $24,416.1         45.4%        $20,635.7          43.9%
    2        BBB............................       23,490.9         43.7          21,107.5          44.9
    3        BB.............................        2,620.8          4.9           2,626.7           5.6
    4        B..............................        1,897.1          3.6           1,223.5           2.6
    5        CCC and lower..................          828.8          1.5             776.4           1.7
    6        In or near default.............          482.8          0.9             635.3           1.3
                                             ---------------------------------------------------------------
                  Subtotal..................       53,736.5        100.0%         47,005.1         100.0%
             Redeemable preferred
                 stock......................          547.2                          593.3
                                             ---------------------------------------------------------------
                 Total fixed maturities.....      $54,283.7                      $47,598.4
                                             ===============================================================
</TABLE>

(1)   For securities that are awaiting an SVO rating, the Company has assigned a
      rating based on an analysis that it believes is equivalent to that used by
      the SVO.
(2)   Comparisons between SVO and S&P ratings are published by the National
      Association of Insurance Commissioners.
(3)   Includes 171 securities that are awaiting an SVO rating, with a carrying
      value of $3,569.4 million as of September 30, 2003. Due to lags between
      the funding of an investment, the processing of final legal documents, the
      filing with the SVO, and the rating by the SVO, there will always be a
      number of unrated securities at each statement date.
(4)   Includes the effect of $130.0 million notional invested in the Company's
      credit-linked note program, $110.0 million notional of written credit
      default swaps on fixed maturity securities in the AAA/AA/A category and
      $20.0 million notional of written credit default swaps on fixed maturity
      securities in the BBB category. As of December 31, 2002 the Company had
      $55.0 million notional invested in the Company's credit linked note
      program, $10.0 million notional written credit default swaps on fixed
      maturity securities in the AAA/AA/A category and $45.0 million notional
      written credit default swaps on fixed maturity securities in the BBB
      category.
(5)   The Company entered into a credit enhancement agreement in the form of a
      guaranty from an AAA rated financial guarantor in 1996. To reflect the
      impact of this guaranty on the overall portfolio, the Company has
      presented securities covered in aggregate by the guaranty at rating levels
      provided by the SVO and Moody's that reflect the guaranty. As a result,
      $113.8 million of SVO Rating 2, $525.5 million of SVO Rating 3, $210.4
      million of SVO Rating 4, and $7.6 million of SVO Rating 5 underlying
      securities are included as $644.2 million of SVO Rating 1, $159.8 million
      of SVO Rating 2 and $53.3 million of SVO Rating 3 as of September 30, 2003
      and $94.0 million of SVO Rating 2, $718.0 million of SVO Rating 3, and
      $141.3 million of SVO Rating 4 underlying securities are included as
      $753.2 million of SVO Rating 1, $150.1 million of SVO Rating 2 and $50.0
      million of SVO Rating 3 as of December 31, 2002. The guaranty also
      contains a provision that the guarantor can recover from the Company
      certain amounts paid over the history of the program in the event a
      payment is required under the guaranty. As of September 30, 2003 and
      December 31, 2002, the maximum amount that can be recovered under this
      provision was $105.2 million and $82.3 million, respectively.

     The table above sets forth the SVO ratings for the bond portfolio along
with an equivalent S&P rating agency designation. The majority of the fixed
maturity investments are investment grade, with 89.2% and 88.8% of fixed
maturity investments invested in Category 1 and 2 securities as of September 30,
2003 and December 31, 2002, respectively. Below investment grade bonds were
10.8% and 11.2% of fixed maturity investments and 7.8% of total invested assets
at both September 30, 2003 and December 31, 2002 This allocation reflects the
Company strategy of avoiding the unpredictability of interest rate risk in favor
of relying on the Company's bond analysts' ability to better predict credit or
default risk. The bond analysts operate in an industry-based, team-oriented
structure that permits the evaluation of a wide range of below investment grade
offerings in a variety of industries resulting in a well-diversified high yield
portfolio.

      Valuation techniques for the bond portfolio vary by security type and the
availability of market data. Pricing models and their underlying assumptions
impact the amount and timing of unrealized gains and losses recognized, and the
use of different


                                       80
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                      JOHN HANCOCK FINANCIAL SERVICES, INC.

pricing models or assumptions could produce different financial results.
External pricing services are used where available, broker dealer quotes are
used for thinly traded securities, and a spread pricing matrix is used when
price quotes are not available, which typically is the case for our private
placement securities. The spread pricing matrix is based on credit quality,
country of issue, market sector and average investment life and is created for
these dimensions through brokers' estimates of public spreads derived from their
respective publications. When utilizing the spread pricing matrix, securities
are valued through a discounted cash flow method where each bond is assigned a
spread, which is added to the current U.S. Treasury rates to discount the cash
flows of the security. The spread assigned to each security is changed from
month to month based on changes in the market. Certain market events that could
impact the valuation of securities include issuer credit ratings, business
climate, management changes, litigation, and government actions among others.
The resulting prices are then reviewed by the pricing analysts and members of
the Controller's Department. The Company's pricing analysts take appropriate
actions to reduce valuations of securities where such an event occurs which
negatively impacts the securities' value. Although the Company believes its
estimates reasonably reflect the fair value of those securities, the key
assumptions about risk premiums, performance of underlying collateral (if any)
and other factors involve significant assumptions and may not reflect those of
an active market. To the extent that bonds have longer maturity dates,
management's estimate of fair value may involve greater subjectivity since they
involve judgment about events well into the future. Then, every quarter, there
is a comprehensive review of all impaired securities and problem loans by a
group consisting of the Chief Investment Officer and the Bond Investment
Committee. The valuation of impaired bonds for which there is no quoted price is
typically based on the present value of the future cash flows expected to be
received. If the company is likely to continue operations, the estimate of
future cash flows is typically based on the expected operating cash flows of the
company that are available to make payments on the bonds. If the company is
likely to liquidate, the estimate of future cash flows is based on an estimate
of the liquidation value of its net assets.

      As of September 30, 2003 and December 31, 2002, 45.0% and 49.9% of our
below investment grade bonds are in Category 3, the highest quality below
investment grade. Category 6 bonds, those in or near default, represent
securities that were originally acquired as long-term investments, but
subsequently became distressed. The carrying value of bonds in or near default
was $482.8 million and $635.3 million as of September 30, 2003 and December 31,
2002, respectively. As of September 30, 2003 and December 31, 2002, $5.3 million
and $10.7 million, respectively of interest on bonds near default was included
in accrued investment income. Unless the Company reasonably expects to collect
investment income on bonds in or near default, the accrual will be ceased and
any accrued income reversed. Management judgment is used and the actual results
could be materially different.

      Bonds rated Category 5 by the SVO decreased by $340.7 million for the
quarter and increased $52.4 million for the nine month period ended September
30, 2003. Approximately $150 million of the decrease for the quarter was due to
net upgrades by the SVO, $181 million is due to sales, maturities and
prepayments and $11 million is due to a decrease in market values.

      In keeping with the investment philosophy of tightly managing interest
rate risk, the Company's MBS & ABS holding are heavily concentrated in
commercial MBS where the underlying loans are largely call protected, which
means they are not pre-payable without penalty prior to maturity at the option
of the issuer. By investing in MBS and ABS securities with relatively
predictable repayments, the Company adds high quality, liquid assets to our
portfolios without incurring the risk of cash flow variability. The Company
believes the portion of its MBS/ABS portfolio subject to prepayment risk as of
September 30, 2003 and December 31, 2002 was limited to approximately $1,722
million and $990 million, respectively, or 18.9% and 12.6% of our total MBS/ABS
portfolio and 3.2% and 2.1% of our total fixed maturity securities holdings,
respectively.


                                       81
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      The following table shows the composition by our internal industry
classification of the fixed maturity securities portfolio and the unrealized
gains and losses contained therein.

             Fixed Maturity Securities -- By Industry Classification

<TABLE>
<CAPTION>
                                                                         As of September 30, 2003
                                       ---------------------------------------------------------------------------------------------
                                                                       Carrying
                                                                       Value of
                                                                      Securities
                                                                         with                       Carrying Value of
                                            Total           Net          Gross          Gross       Securities with      Gross
                                           Carrying     Unrealized    Unrealized      Unrealized    Gross Unrealized   Unrealized
                                            Value       Gain (Loss)      Gains          Gains            Losses          Losses
                                       ---------------------------------------------------------------------------------------------
                                                                              (in millions)
<S>                                        <C>           <C>           <C>            <C>              <C>               <C>
Corporate securities:
     Banking and finance.............      $ 7,066.8     $  425.3      $ 6,282.3      $  440.2         $   784.5         $ (14.9)
     Communications..................        3,449.7        256.7        3,083.0         280.4             366.7            (23.7)
     Government......................        3,108.8        142.9        2,064.2         154.2           1,044.6            (11.3)
     Manufacturing...................        7,779.9        449.3        6,347.4         536.3           1,432.5            (87.0)
     Oil & gas.......................        4,906.3        347.0        4,265.7         430.2             640.6            (83.2)
     Services / trade................        2,872.0        232.0        2,631.3         243.1             240.7            (11.1)
     Transportation..................        2,960.2        100.9        2,125.3         190.7             834.9            (89.8)
     Utilities.......................        9,886.6        508.1        7,592.9         674.1           2,293.7           (166.0)
     Other...........................          194.6         15.4          181.9          15.5              12.7             (0.1)
                                       ---------------------------------------------------------------------------------------------
   Total corporate securities........       42,224.9      2,477.6       34,574.0       2,964.7           7,650.9           (487.1)

Asset-backed and mortgage-
   backed securities.................        9,141.5        224.9        6,871.6         407.5           2,269.9           (182.6)
U.S. Treasury securities and
   obligations of U.S. government
   agencies..........................          197.2          6.9          157.7           7.4              39.5             (0.5)
Debt securities issued by foreign
   governments (1) ..................        1,983.9        230.1        1,871.4         238.6             112.5             (8.5)
Obligations of states and political
   subdivisions......................          736.2         20.8          531.9          24.3             204.3             (3.5)
                                       ---------------------------------------------------------------------------------------------
     Total...........................      $54,283.7     $2,960.3      $44,006.6      $3,642.5         $10,277.1          $(682.2)
                                       =============================================================================================
</TABLE>

(1)   Includes $1,700.9 million in debt securities held by Maritime Life, our
      Canadian insurance subsidiary, and issued and fully supported by the
      Canadian federal, provincial or municipal governments.


                                       82
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

             Fixed Maturity Securities -- By Industry Classification

<TABLE>
<CAPTION>
                                                                          As of December 31, 2002
                                       --------------------------------------------------------------------------------------------
                                                                          Carrying
                                                                          Value of
                                                                       Securities with              Carrying Value of
                                            Total                           Gross         Gross      Securities with     Gross
                                           Carrying    Net Unrealized    Unrealized     Unrealized   Gross Unrealized  Unrealized
                                            Value       Gain (Loss)         Gains         Gains           Losses         Losses
                                       --------------------------------------------------------------------------------------------
                                                                              (in millions)
<S>                                        <C>          <C>              <C>             <C>            <C>             <C>
Corporate securities:
     Banking and finance.............      $ 6,036.6    $  234.8         $ 4,872.9       $  286.8       $ 1,163.7       $   (52.0)
     Communications..................        2,317.5        87.7           1,867.3          140.0           450.2           (52.3)
     Government......................        2,596.5       121.3           1,825.7          140.3           770.8           (19.0)
     Manufacturing...................        7,410.3       209.2           5,672.5          396.7         1,737.8          (187.5)
     Oil & gas.......................        4,457.3        90.4           3,416.9          280.5         1,040.4          (190.1)
     Services / trade................        2,553.0       132.2           2,196.8          149.2           356.2           (17.0)
     Transportation..................        2,900.9        37.8           2,194.0          167.7           706.9          (129.9)
     Utilities.......................        9,087.5      (137.5)          5,937.5          400.8         3,150.0          (538.3)
     Other...........................          158.7         9.8           148.5            11.2             10.2            (1.4)
                                       --------------------------------------------------------------------------------------------
   Total corporate securities........       37,518.3       785.7          28,132.1        1,973.2         9,386.2        (1,187.5)

Asset-backed and mortgage-
   backed securities.................        7,853.8       145.6           6,133.1          424.1         1,720.7          (278.5)
U.S. Treasury securities and
   obligations of U.S. government
   agencies..........................          221.7        10.7             205.9           10.9            15.8            (0.2)
Debt securities issued by foreign
   governments (1)...................        1,663.4       175.5           1,643.0          178.4            20.4            (2.9)
Obligations of states and political
   subdivisions......................          341.2        24.4             337.8           24.5             3.4            (0.1)
                                       --------------------------------------------------------------------------------------------
     Total...........................      $47,598.4    $1,141.9         $36,451.9       $2,611.1       $11,146.5       $(1,469.2)
                                       ============================================================================================
</TABLE>

(1)   Includes $1,298.1 million in debt securities held by Maritime Life, our
      Canadian insurance subsidiary, and issued and fully supported by the
      Canadian federal, provincial or municipal governments.

      As of September 30, 2003 and December 31, 2002, there are gross unrealized
gains of $3,642.5 million and $2,611.1 million, and gross unrealized losses of
$682.2 million and $1,469.2 million on the fixed maturities portfolio. As of
September 30, 2003 gross unrealized losses of $682.2 million include $608.6
million, or 89.2%, of gross unrealized losses concentrated in the utilities,
manufacturing, oil and gas, transportation, and asset-backed and mortgage-backed
securities. The tables above show gross unrealized losses before amounts that
are allocated to the closed block policyholders or participating pension
contractholders. Of the $682.2 million of gross unrealized losses in the
portfolio at September 30, 2003, $88.4 million was in the closed block and $30.0
million has been allocated to participating pension contractholders, leaving
$563.8 million of gross unrealized losses after such allocations. The 2002 gross
unrealized losses of $1,469.2 million included $1,324.3 million, or 90.1%, of
gross unrealized losses concentrated in the utilities, manufacturing, oil and
gas, transportation, and asset-backed and mortgage-backed securities. Only the
utilities sector has net unrealized losses as of December 31, 2002. The tables
above show gross unrealized losses before amounts that were allocated to the
closed block policyholders or participating pension contractholders. Of the
$1,469.2 million of gross unrealized losses in the portfolio at December 31,
2002, $191.0 million is in the closed block and $62.6 million was allocated to
participating pension contractholders, leaving $1,215.6 million of gross
unrealized losses after such allocations.

      Manufacturing: Manufacturing is a large, diverse sector encompassing
cyclical industries. Low commodity prices have pressured the subsectors of
mining, chemicals, metals, and forest products. We are beginning to see
commodity price improvement as the U.S. economy begins to recover and as the
growth in demand from China continues to grow. The higher prices have translated
into better earnings and, as a result, many of the bonds in this sector have
recovered. The more troublesome subsectors continue to be chemicals and forest
products. We have financed these subsectors though several economic cycles and
will typically hold our investments until they recover in value or mature. Our
portfolio also benefits from our underwriting process where we stress test each
company's financial performance through a recession scenario.


                                       83
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Oil & Gas: In the Oil & Gas industry, much of our unrealized loss arises
from companies in emerging markets, primarily Latin America and particularly in
Venezuela. Our philosophy in emerging markets is to generally lend to those
companies with dollar based export products such as oil companies. Emerging
markets continue to experience significant stress and bond prices across most
emerging market countries are down. However, our oil & gas investments are
faring well as these companies have dollar based revenues to pay their debts and
have continued to do so. In many cases, deals are structured so that all export
revenues first pass through an offshore trust and our debt service is then paid
before any dollars are released back to the company. This type of transaction is
known as an export receivables deal. All of our Venezuelan transactions are
structured in this manner. The strike in Venezuela raised the risk profile of
our oil transactions in this country, because the investments we have in
Venezuela require oil production in order for these deals to produce payments.
The gross unrealized loss on our Venezuelan oil and gas holdings was $62.7
million and $107.7 million as of September 30, 2003 and December 31, 2002,
respectively. The improvement in the gross unrealized loss is largely due to the
end of the Venezuelan oil strike and the increases in oil production to
approximately 80% of pre-strike levels. We expect further price recovery in
these bonds as the market becomes comfortable that these production levels will
continue.

      Transportation: The Transportation sector consists largely of air, rail,
and automotive manufacturers and service companies. All of these subsectors are
experiencing cyclical downturns, particularly the airline industry, having been
hit both by the recession and the fallout from September 11, 2001. We lend to
this industry almost exclusively on a secured basis (approximately 99% of our
loans are secured). These secured airline financings are of two types: Equipment
Trust Certificates (ETC's) and Enhanced Equipment Trust Certificates (EETC's).
The ETC's initially have an 80% loan-to-value ratio and the EETC senior tranches
initially have a 40-50% loan-to-value and include a provision for a third party
to pay interest for eighteen months from a default. For us to lose money on an
ETC, three things must happen: the airline must default, the airline must decide
it does not want to fly our aircraft, and the aircraft must be worth less than
our loan. When lending to this industry, we underwrite both the airline and the
aircraft. We've been lending to this industry in this fashion for 25 years
through several economic cycles and have seen values on our secured airline
bonds fall and recover thorough these cycles. EETC's are classified as
asset-backed securities and they account for $96.9 million and $181.1 million of
the $182.6 million and $278.5 million of gross unrealized loss in the
asset-backed and mortgage-backed securities category as of September 30, 2003
and December 31, 2002, respectively. While the airline industry is making
positive strides in reducing its cost structure, a significant recovery in this
sector requires a growing economy and a pick up in business travel. In the most
recent quarter ending September 30, 2003, most of the major carriers have
reported improved financial results. This trend is encouraging and we expect it
to continue barring any new terrorist events or a reversal of the course of the
U.S. economy. We do still expect that the senior secured nature of our loans to
this industry will protect our holdings through this difficult time.

      Utilities: The Utility sector has faced a number of challenges over the
past few years including the California Power Crisis, the Enron bankruptcy and
the recession which slowed the growth in demand. More recently, there have been
issues around energy trading activities and the financial liquidity of some
large merchant industry players. These events caused a general widening in
utility and project finance bond spreads over the course of 2002. We expect some
continued stress in this sector as owners of merchant plants work through their
liquidity issues with the banks. Investors are likely to see continued
restructurings and/or bankruptcy filings from those companies unable to reach
agreement with the banks. Longer term, we believe the reduction in power supply
from reduced capital expenditures and the shutting of inefficient plants will
support a gradual rise in power prices that will help this sector recover. Thus
far this year, there are a number of positive signs in this sector as power
prices have increased and, most importantly, banks are more willing to refinance
their maturing lines, albeit often on a secured basis. As a result, prices in
power sector bonds have improved significantly, as shown by the reduction in
gross unrealized loss on our utility sector bonds from $538.3 million as of
December 31, 2002 to $166.0 million as of September 30, 2003.

      Asset-backed and mortgage-backed securities: As described above, as of
September 30, 2003 and December 31, 2002, the main driver of the unrealized loss
in this category is $96.9 million and $181.1 million of gross unrealized loss on
EETC's with a GAAP book value of $668.5 million and $754.0 million,
respectively. This $96.9 million and $181.1 million of gross unrealized loss
represent 53% and 65% of the total gross unrealized loss in this category.
EETC's are financings secured by a pool of aircraft. The vast majority of our
EETC holdings ($661.8 million of the $668.5 million as of September 30, 2003 and
$721.3 million of the $754.0 million as of December 31, 2002) are the most
senior tranches in the EETC structure. The most senior tranches are generally
structured to have an initial loan-to-value of 40-50%. Given the drop in airline
passenger traffic and the financial difficulties of most of the major carriers,
aircraft values have dropped significantly and hence EETC's have declined in
price, although prices have firmed over the past quarter. We still expect that
most of the senior tranche EETC have enough subordination and asset coverage to
ensure full and timely repayment. The major risk to this portfolio is a further
decline in passenger traffic due to a reversal in the economic recovery or
increased terrorist activity, further depressing aircraft values Thus far, we
have never lost money on a senior tranche EETC even though some of the aircraft
backing our transactions have been leased to airlines that have gone out of


                                       84
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

business. The improved financial results of the airline industry in the 3rd
quarter and the resulting stabilization of aircraft values should set the stage
for improving EETC bond prices. Never the less, we remain concerned over further
terrorist events or a setback of the U.S. economy.

      The following table shows the composition by credit quality of the
securities with gross unrealized losses in our fixed maturity securities
portfolio. The gross unrealized loss on investment grade bonds (those rated in
categories 1 and 2 by the SVO) declined by $293 million in the nine month period
ending September 30, 2003 to $251 million. The gross unrealized loss on below
investment grade bonds (those rated in categories 3,4,5, and 6 by the SVO)
declined even more over this period, dropping by $494 million to a total of $420
million as of September 30, 2003.

          Unrealized Losses on Fixed Maturity Securities -- By Quality

<TABLE>
<CAPTION>
                                                                        As of September 30, 2003
                                                  ---------------------------------------------------------------------
                                                     Carrying Value of
   SVO                 S&P Equivalent              Securities with Gross      % of     Gross Unrealized
Rating (1)            Designation (2)              Unrealized Losses (3)     Total        Losses (3)      % of Total
-----------------------------------------------------------------------------------------------------------------------
                                                       (in millions)                    (in millions)
    <S>        <C>                                       <C>                   <C>           <C>              <C>
    1          AAA/AA/A.......................           $ 4,792.8             47.6%         $(130.7)         19.5%
    2          BBB............................             2,462.1             24.4           (120.3)         17.9
    3          BB.............................               943.9              9.4           (114.6)         17.1
    4          B..............................             1,137.6             11.3           (184.9)         27.5
    5          CCC and lower..................               560.6              5.6           (104.9)         15.6
    6          In or near default.............               177.8              1.7            (15.8)          2.4
                                                  ---------------------------------------------------------------------
                    Subtotal..................            10,074.8            100.0%          (671.2)        100.0%
               Redeemable preferred stock.....               202.3                             (11.0)
                                                  ---------------------------------------------------------------------
                    Total.....................           $10,277.1                           $(682.2)
                                                  =====================================================================
</TABLE>

(1)   With respect to securities that are awaiting rating, the Company has
      assigned a rating based on an analysis that it believes is equivalent to
      that used by the SVO.
(2)   Comparisons between SVO and S&P ratings are published by the National
      Association of Insurance Commissioners.
(3)   Includes 66 securities with gross unrealized losses that are awaiting an
      SVO rating with a carrying value of $1,609.2 million and unrealized losses
      of $22.08 million. Due to lags between the funding of an investment, the
      processing of final legal documents, the filing with the SVO, and the
      rating by the SVO, there will always be a number of unrated securities at
      each statement date. Unrated securities comprised 15.7% and 3.2% of the
      total carrying value and total gross unrealized losses of securities in a
      loss position, including redeemable preferred stock, respectively.


                                       85
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

          Unrealized Losses on Fixed Maturity Securities -- By Quality

<TABLE>
<CAPTION>
                                                                        As of December 31, 2002
                                                  ---------------------------------------------------------------------
                                                     Carrying Value of
   SVO                 S&P Equivalent              Securities with Gross      % of     Gross Unrealized
Rating (1)            Designation (2)              Unrealized Losses (3)     Total        Losses (3)      % of Total
-----------------------------------------------------------------------------------------------------------------------
                                                       (in millions)                    (in millions)
    <S>        <C>                                       <C>                   <C>        <C>                <C>
    1          AAA/AA/A.......................           $ 3,375.3             31.0%      $  (156.3)         10.7%
    2          BBB............................             4,267.9             39.2          (387.3)         26.6
    3          BB.............................             1,634.5             15.0          (414.4)         28.4
    4          B..............................               691.5              6.4          (222.6)         15.3
    5          CCC and lower..................               541.8              5.0          (195.0)         13.4
    6          In or near default.............               369.3              3.4           (82.1)          5.6
                                                  ---------------------------------------------------------------------
                    Subtotal..................            10,880.3            100.0%       (1,457.7)        100.0%
               Redeemable preferred stock.....               266.2                            (11.5)
                                                  ---------------------------------------------------------------------
                     Total....................           $11,146.5                        $(1,469.2)
                                                  =====================================================================
</TABLE>

(1)   With respect to securities that are awaiting rating, the Company has
      assigned a rating based on an analysis that it believes is equivalent to
      that used by the SVO.
(2)   Comparisons between SVO and S&P ratings are published by the National
      Association of Insurance Commissioners.
(3)   Includes 71 securities with gross unrealized losses are awaiting an SVO
      rating with a carrying value of $1,677.0 million and unrealized losses of
      $63.4 million. Due to lags between the funding of an investment, the
      processing of final legal documents, the filing with the SVO, and the
      rating by the SVO, there will always be a number of unrated securities at
      each statement date. Unrated securities comprised 15.0% and 4.3% of the
      total carrying value and total gross unrealized losses of securities in a
      loss position, including redeemable preferred stock, respectively.

  Unrealized Losses on Fixed Maturity Securities -- By Investment Grade and Age

<TABLE>
<CAPTION>
                                                                    As of September 30, 2003
                                    ---------------------------------------------  ----------------------------------------------
                                                   Investment Grade                           Below Investment Grade
                                    ---------------------------------------------  ----------------------------------------------
                                     Carrying Value                                Carrying Value
                                      of Securities                                 of Securities
                                       with Gross                                    with Gross
                                       Unrealized        Hedging        Market       Unrealized        Hedging        Market
                                         Losses        Adjustments   Depreciation      Losses        Adjustments   Depreciation
---------------------------------------------------------------------------------  ----------------------------------------------
                                                    (in millions)                                 (in millions)
<S>                                     <C>             <C>            <C>               <C>           <C>          <C>
Three months or less..............      $2,363.0        $(13.2)        $ (34.4)          $212.5        $  (2.1)     $  (2.1)
Greater than three months
     to six months................       1,612.8          (2.9)          (53.1)           162.2           (4.2)       (12.6)
Greater than six months to
     nine months..................         312.5         (14.5)           (5.1)           216.9           (1.8)        (6.9)
Greater than nine months to
     twelve months................         886.3          (4.6)          (20.0)           188.4           (2.3)        (7.8)
Greater than twelve months........       2,080.4         (54.1)          (49.1)         2,039.8          (95.4)      (285.0)
                                    ---------------------------------------------  ----------------------------------------------
     Subtotal.....................       7,255.0         (89.3)         (161.7)        $2,819.8         (105.8)      (314.4)
Redeemable preferred stock........         196.9            --           (10.4)             5.4             --         (0.6)
                                    ---------------------------------------------  ----------------------------------------------
     Total........................      $7,451.9        $(89.3)        $(172.1)        $2,825.2        $(105.8)     $(315.0)
                                    =============================================  ==============================================
</TABLE>


                                       86
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

  Unrealized Losses on Fixed Maturity Securities -- By Investment Grade and Age

<TABLE>
<CAPTION>
                                                                      As of December 31, 2002
                                ------------------------------------------------  -------------------------------------------------
                                                 Investment Grade                              Below Investment Grade
                                ------------------------------------------------  -------------------------------------------------
                                  Carrying Value of                               Carrying Value of
                                   Securities with                                 Securities with
                                   Gross Unrealized     Hedging        Market      Gross Unrealized      Hedging         Market
                                        Losses        Adjustments   Depreciation        Losses         Adjustments    Depreciation
--------------------------------------------------------------------------------  -------------------------------------------------
                                                     (in millions)                                    (in millions)
<S>                                 <C>                <C>             <C>            <C>              <C>              <C>
Three months or less.........       $2,255.2           $ (19.2)        $ (48.7)       $  276.3         $  (2.2)         $ (13.0)
Greater than three months
     to six months...........          952.4             (16.0)          (34.1)          406.2            (7.6)          (113.8)
Greater than six months
     to nine months..........          909.1             (35.0)          (24.8)          566.4           (14.4)           (78.1)
Greater than nine months
     to twelve months........          423.9             (12.6)          (27.7)          393.4            (5.3)           (61.4)
Greater than twelve months...        3,102.6             (70.1)         (255.4)        1,594.8           (74.9)          (543.4)
                                ------------------------------------------------  -------------------------------------------------
     Subtotal................        7,643.2            (152.9)         (390.7)        3,237.1          (104.4)          (809.7)
Redeemable preferred stock...          266.2              --             (11.5)           --              --               --
                                ------------------------------------------------  -------------------------------------------------
     Total...................       $7,909.4           $(152.9)        $(402.2)       $3,237.1         $(104.4)         $(809.7)
                                ================================================  =================================================
</TABLE>

      The tables above show the Company's investment grade and below investment
grade securities that were in a loss position at September 30, 2003 and December
31, 2002 by the amount of time the security has been in a loss position. Gross
unrealized losses from hedging adjustments represent the amount of the
unrealized loss that results from the security being designated as a hedged item
in a fair value hedge. When a security is so designated, its cost basis is
adjusted in response to movements in interest rates. These adjustments, which
are non-cash and reverse with the passage of time as the asset and derivative
mature, impact the amount of unrealized loss on a security. The remaining
portion of the gross unrealized loss represents the impact of interest rates on
the non-hedged portion of the portfolio and unrealized losses due to
creditworthiness on the total fixed maturity portfolio.

      As of September 30, 2003 and December 31, 2002, respectively, the fixed
maturity securities had a total gross unrealized loss of $487.1 million and
$1,211.9 million, excluding basis adjustments related to hedging relationships.
Of these totals, $361.9 million and $887.9 million, respectively, are due to
securities that have had various amounts of unrealized loss for more than nine
months. Of this, $69.1 million and $283.1 million, respectively comes from
securities rated investment grade. Unrealized losses on investment grade
securities principally relate to changes in interest rates or changes in credit
spreads since the securities were acquired. Credit rating agencies statistics
indicate that investment grade securities have been found to be less likely to
develop credit concerns.

      As of September 30, 2003 and December 31, 2002, $292.8 million and $604.8
million, respectively, of the $487.1 million and $1,211.9 million resided in
below investment grade securities with various amounts of unrealized loss for
over nine months. At September 30, 2003, all of these securities were current as
to the payments of principal and interest with the exception of 8 securities
with a carrying value of $19.9 million and an unrealized loss of $17.4 million.
Of the total $292.8 million, $143.3 million traded above 80% of amortized cost
at September 30, 2003 and an additional $49.0 million traded above 80% of
amortized cost within the last nine months, for a total of $192.3 million. Of
the total $192.3 million in this category, utility related bonds made up $76.0
million. As described earlier, the utility sector suffered from oversupply and
slower than expected demand last year. This led to many credit quality
downgrades in the sector and corresponding price declines. We have seen evidence
of improvement in the utility sector recently as companies have curtailed
expansion plans and sold assets to conserve cash flow and strengthen their
balance sheets. On the other hand, $51.5 million of this $192.3 million total
comes from airline related bonds and this sector has been slower to recover, but
has shown recent signs of improvement. While, as described earlier, we expect
the secured nature of our positions to protect our value, the increased stress
in this industry is of concern.


                                       87
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Unrealized Losses as of September 30, 2003

      For the nine months ended September 30, 2003, the remaining portion of the
unrealized loss, $100.5 million, arises from below investment grade securities
that have traded below 80 percent of amortized cost for over nine months. All of
these bonds are current on payments of principal and interest and we believe,
based on currently available information that it is probable that these
securities will continue to pay based on their original terms. We carefully
track these investments to ensure our continued belief that their prices will
recover. More detail on the most significant securities is contained below:

      o     $52.8 million on secured airline bonds: $33.6 million on senior
            tranche EETC's, $17.9 million on ETC's, and $1.3 million on a
            subordinated tranche of an EETC. The EETC's are backed by planes of
            an airline currently in bankruptcy. These EETC's, however, are all
            current due to the 18 month liquidity facility with which to make
            interest payments and in all these positions, the total loan balance
            of the senior tranche is still less than the current appraised value
            of the underlying aircraft. Accordingly we expect the market prices
            of these bonds to recover. The ETC's and the subordinated EETC are
            backed by planes of major US airlines that we do not expect to file
            for bankruptcy and hence we expect these bonds to recover.

      o     $21.0 million on a fertilizer plant that sources its natural gas
            from PDVSA, the Venezuelan oil company. While the cost of the
            natural gas in very inexpensive, there are concerns about the
            reliability of the supply. Also, the plant experienced some start up
            operational difficulties that now appear to have been fixed. Its
            equity sponsors have supported the project with additional
            contributions of equity and based on our review of this credit we
            expect their continued support. Hence we expect the price to
            continue to recover.

      o     $15.7 million from structured investment based on oil and gas
            payments to an Argentine province. This transaction benefits from
            (1) rights to 80% of the royalty payments received by the province,
            (2) a six month debt service reserve located in the U.S., and (3) a
            political risk insurance policy from a major reinsurer that will
            take over payments in the event the government imposes transfer or
            currency conversion limitations. Currently, the major risk is that
            the local oil and gas companies are making payments to the province
            based on a fixed exchange rate rather than the market exchange rate.
            While the province is working to correct this, if it does not change
            we will need to dip into the debt service reserve account for a
            portion of the debt service payments this year and we will
            ultimately need to restructure our rights to royalty payments to
            extend beyond the maturity of our notes, so a restructuring would
            likely extend the term of our note with interest.

      o     $6.1 million on the bond of a major telecommunications company. A
            major portion of the value of this company is derived from its local
            exchange business. The company has taken steps to deleverage and is
            expected to be in a positive cash flow position this year. As the
            company continues to reduce leverage through cost cutting and asset
            dispositions, we expect these securities to continue to recover in
            value.

      o     $3.9 million from a structured receivables transaction based on the
            export of soybeans from a major soybean producer in Argentina. The
            international buyers of the soybeans make payment to an offshore
            trust with our debt service paid before any dollars flow back to the
            Argentine company. We expect this structure to continue to protect
            our debt service payments.

      The Company's investment grade and below investment grade bonds trading at
less than 80% of amortized cost for more than one year amounted to $90.4 million
in September 30, 2003 down $65.4 million or 42.0% from December 31, 2002.
Approximately one half of that amount is associated with U.S. dollar denominated
structured receivables in Venezuela and Argentina, many of which are analyzed
above.

      The Company believes, however, that after its comprehensive review of each
borrower's ability to meet the obligations of the notes, and based on
information available at this time, these securities will continue to pay as
scheduled, and the Company has the ability and the intent to hold these
securities until they recover in value or mature. The scheduled maturity dates
for securities in an unrealized loss position at September 30, 2003 and December
31, 2002 is shown below.


                                       88
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

          Unrealized Losses on Fixed Maturity Securities -- By Maturity

<TABLE>
<CAPTION>
                                                             September 30, 2003                 December 31, 2002
                                                      --------------------------------- --------------------------------
                                                         Carrying Value                   Carrying Value
                                                         of Securities       Gross        of Securities        Gross
                                                           with Gross      Unrealized       with Gross       Unrealized
                                                        Unrealized Loss       Loss       Unrealized Loss        Loss
                                                      --------------------------------- --------------------------------
                                                               (in millions)                      (in millions)

<S>                                                      <C>                  <C>            <C>            <C>
Due in one year or less............................      $   425.2            $ (12.2)       $   586.8      $   (37.9)
Due after one year through five years..............        1,835.1             (109.1)         2,574.9         (273.2)
Due after five years through ten years.............        1,951.6             (161.9)         2,573.1         (429.9)
Due after ten years................................        3,795.3             (216.4)         3,691.0         (449.7)
                                                      --------------------------------- --------------------------------
                                                           8,007.2             (499.6)         9,425.8       (1,190.7)
Asset-backed and mortgage-backed securities........        2,269.9             (182.6)         1,720.7         (278.5)
                                                      --------------------------------- --------------------------------

     Total.........................................      $10,277.1            $(682.2)       $11,146.5      $(1,469.2)
                                                      ================================= ================================
</TABLE>


                                       89
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      As of September 30, 2003 we had 91 securities representing 17 credit
exposures that had an unrealized loss of $10 million or more. They include:

<TABLE>
<CAPTION>
     Description of Issuer                                                                    Amortized Cost    Unrealized Loss
                                                                                            -------------------------------------
                                                                                                          (in millions)

<S>                                                                                              <C>               <C>
     Venezuelan oil company with US dollar based flows.................................          $  154.5          $ (25.8)
     Notes secured by leases on a pool of aircraft ....................................              35.1            (21.5)
     Argentinean trust holding rights to oil and gas ..................................              43.6            (20.9)
     Secured financings to large US airline  ..........................................             117.7            (20.8)
     Joint venture with a Venezuelan oil company ......................................              41.3            (16.4)
     Securitized investment of aircraft ...............................................             224.8            (16.3)
     Major US airline..................................................................             159.5            (15.1)
     US natural gas fired power generator .............................................              83.1            (14.9)
      Joint venture with a Venezuelan oil company......................................              63.0            (14.4)
     Major US airline .................................................................              73.9            (14.2)
     Major US airline .................................................................             180.8            (14.1)
     Notes secured by leases on a pool of aircraft   ..................................              52.1            (13.1)
     Lease financing with US fossil fuel power generation .............................              84.2            (11.9)
     Joint venture Venezuelan oil company..............................................              62.2            (11.5)
     Large US based merchant energy generator..........................................              70.9            (11.5)
     Finance subsidiary of US paper\wood products .....................................             207.0            (10.4)
     US power generator with multiple plants...........................................              98.9            (10.0)
                                                                                            -------------------------------------
          Total........................................................................          $1,752.6           (262.8)
</TABLE>

      Unrealized losses improved during the three and nine month periods ended
September 30, 2003. As of June 30, 2003, there were 17 credit exposures with an
unrealized loss of $10 million or more with an amortized cost of $1,698.9
million and unrealized loss of $281.2 million. As of December 31, 2002 there
were 40 credit exposures with unrealized losses of $10 million or more, with an
amortized cost of $2,660.0 million and unrealized losses of $825.7 million. The
area of most concern continues to be the airline sector and it represents 7
names on this list. All of the above securities have undergone thorough analysis
by our investment professionals, and at this time we believe that the borrowers
have the financial capacity to make all required contractual payments on the
notes when due, and we intend to hold these securities until they either mature
or recover in value.

      Mortgage Loans. As of September 30, 2003 and December 31, 2002, the
Company held mortgage loans with a carrying value of $12.5 billion and $11.8
billion, including $2.9 billion and $2.6 billion respectively, of agricultural
loans and $9.6 billion and $9.2 billion, respectively, of commercial loans.
Impaired loans comprised 0.9% and 0.4% of the mortgage portfolio as of September
30, 2003 and December 31, 2002, respectively. The Company's average historical
impaired loan percentage during the period of 1997 through 2002 is 1.4%. The
historical percentage is higher than the current 0.9% because the historical
percentage includes some remaining problem assets of the 1990's real estate
downturn, some of which are still held. Maritime Life managed $1.9 billion and
$1.5 billion, respectively, of which $1.0 billion and $0.7 billion,
respectively, were government-insured by the Canada Mortgage and Housing
Corporation.


                                       90
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      The following table shows the Company's agricultural mortgage loan
portfolio by its three major sectors: agri-business, timber and production
agriculture.

<TABLE>
<CAPTION>
                                      As of September 30, 2003                    As of December 31, 2002
                             ------------------------------------------  ------------------------------------------
                               Amortized      Carrying     % of Total      Amortized    Carrying     % of Total
                                  Cost         Value     Carrying Value       Cost        Value    Carrying Value
                             ------------------------------------------  ------------------------------------------
                             (in millions)                               (in millions)

<S>                              <C>           <C>           <C>          <C>          <C>             <C>
Agri-business..............      $1,721.6      $1,721.6       60.0%       $ 1,528.0    $ 1,522.0        57.8%

Timber.....................       1,157.2       1,129.2       39.3          1,091.5      1,087.8        41.3

Production agriculture.....          20.0          20.0        0.7             25.3         25.2         0.9
                             ------------------------------------------  ------------------------------------------
    Total                        $2,898.8      $2,870.8      100.0%       $ 2,644.8    $ 2,635.0       100.0%
                             ==========================================  ==========================================
</TABLE>

      The following table shows the distribution of our mortgage loan portfolio
by property type as of the dates indicated. Our commercial mortgage loan
portfolio consists primarily of non-recourse fixed-rate mortgages on fully, or
nearly fully, leased commercial properties.

                        Mortgage Loans - By Property Type

<TABLE>
<CAPTION>
                                         As of September 30, 2003        As of December 31, 2002
                                      ---------------------------------------------------------------
                                          Carrying         % of          Carrying         % of
                                           Value           Total          Value           Total
                                      ---------------------------------------------------------------
                                       (in millions)                  (in millions)
<S>                                       <C>              <C>            <C>              <C>
Apartment..........................       $ 2,193.5         17.5%         $ 2,063.4         17.5%
Office Buildings...................         2,905.5         23.2            2,974.6         25.2
Retail.............................         2,186.4         17.4            1,986.1         16.8
Agricultural.......................         2,870.9         22.9            2,635.0         22.3
Industrial.........................         1,140.1          9.1            1,085.8          9.2
Hotels.............................           461.4          3.7              481.1          4.1
Multi-Family.......................            31.9          0.3               40.4          0.3
Mixed Use..........................           242.0          1.9              155.2          1.3
Other..............................           503.2          4.0              384.1          3.3
                                      ---------------------------------------------------------------
     Total.........................       $12,534.9        100.0%         $11,805.7        100.0%
                                      ===============================================================
</TABLE>

      The following table shows the distribution of our mortgage loan portfolio
by geographical region, as defined by the American Council of Life Insurers
(ACLI).

                        Mortgage Loans -- By ACLI Region

<TABLE>
<CAPTION>
                                  ------------------------------------------------------------------------
                                           As of September 30, 2003             As of December 31, 2002
                                  ------------------------------------------------------------------------
                                     Number      Carrying         % of          Carrying          % of
                                    Of Loans       Value          Total           Value           Total
                                  ------------------------------------------------------------------------
                                               (in millions)                  (in millions)
<S>                                   <C>        <C>              <C>           <C>               <C>
East North Central.......               194      $ 1,133.5          9.0%        $ 1,102.0           9.3%
East South Central.......                76          430.8          3.4             430.9           3.6
Middle Atlantic..........               157        1,606.4         12.8           1,447.4          12.3
Mountain.................               120          483.8          3.9             492.2           4.2
New England..............               130          791.8          6.3             795.2           6.7
Pacific..................               387        2,185.8         17.4           2,139.2          18.1
South Atlantic...........               295        2,363.7         18.9           2,230.2          18.9
West North Central.......                90          426.8          3.4             450.5           3.8
West South Central.......               186          921.9          7.4             954.3           8.1
Canada...................               856        2,190.4         17.5           1,763.8          15.0
                                  ------------------------------------------------------------------------
     Total...............             2,491      $12,534.9        100.0%        $11,805.7         100.0%
                                  ========================================================================
</TABLE>


                                       91
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      The following table shows the carrying values of our mortgage loan
portfolio that are delinquent but not in foreclosure, delinquent and in
foreclosure, restructured and foreclosed. The table also shows the respective
ratios of these items to the total carrying value of our mortgage loan
portfolio. Mortgage loans are classified as delinquent when they are 60 days or
more past due as to the payment of interest or principal. Mortgage loans are
classified as restructured when they are in good standing, but the basic terms,
such as interest rate or maturity date, have been modified as a result of a
prior actual delinquency or an imminent delinquency. All foreclosure decisions
are based on a thorough assessment of the property's quality and location and
market conditions. The decision may also reflect a plan to invest additional
capital in a property to make tenant improvements or renovations to secure a
higher resale value at a later date. Following foreclosure, we rely on our real
estate investment group's ability to manage foreclosed real estate for eventual
return to investment real estate status or outright sale.

                            Mortgage Loan Comparisons

<TABLE>
<CAPTION>
                                                 As of September 30,       As of December 31,
                                                        2003                      2002
                                              -------------------------  -----------------------
                                                           % of Total                % of Total
                                               Carrying     Mortgage     Carrying     Mortgage
                                                 Value     Loans (1)       Value     Loans (1)
                                              -------------------------  -----------------------
                                              (in millions)             (in millions)

<S>                                             <C>           <C>         <C>            <C>
Delinquent, not in foreclosure ............     $ 16.9        0.1%        $  8.1         0.1%
Delinquent, in foreclosure ................       54.0        0.4           44.4         0.4
Restructured ..............................       62.9        0.5           54.8         0.5
Loans foreclosed during period ............       16.0        0.1           26.0         0.2
Other loans with valuation allowance (2) ..       72.3        0.6            8.9         0.1
                                                -------------------       ------------------
  Total ...................................     $222.1        1.7%        $142.2         1.3%
                                                -----------------         ------------------

Valuation allowance .......................     $ 66.8                    $ 61.8
                                                ======                    ======
</TABLE>

(1)   As of September 30, 2003 and December 31, 2002 the Company held mortgage
      loans with a carrying value of $12.5 billion and $11.8 billion,
      respectively.
(2)   Increase as of September 30, 2003 is from a U.S. based forest products
      company that filed for bankruptcy in June 2003.

      The valuation allowance is maintained at a level that is adequate enough
to absorb estimated probable credit losses. Management's periodic evaluation of
the adequacy of the allowance for losses is based on past experience, known and
inherent risks, adverse situations that may affect the borrower's ability to
repay (including the timing of future payments), the estimated value of the
underlying security, the general composition of the portfolio, current economic
conditions and other factors. This evaluation is inherently subjective and is
susceptible to significant changes and no assurance can be given that the
allowances taken will in fact be adequate to cover all losses or that additional
valuation allowances or asset write-downs will not be required in the future.
The valuation allowance for the mortgage loan portfolio was $66.8 million, or
0.5 % of the carrying value of the portfolio as of September 30, 2003.


                                       92
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Investment Results

Net Investment Income. The following table summarizes the Company's investment
results for the periods indicated:

<TABLE>
<CAPTION>
                                                     Three Months Ended                              Nine Months Ended
                                         September 30, 2003      September 30, 2002     September 30, 2003     September 30, 2002
                                        --------------------------------------------------------------------------------------------
                                         Yield       Amount      Yield      Amount      Yield      Amount       Yield      Amount
                                        --------------------------------------------------------------------------------------------
                                                 (in millions)           (in millions)          (in millions)          (in millions)

<S>                                      <C>     <C>            <C>       <C>          <C>        <C>          <C>       <C>
General account assets-excluding
Policy loans
     Gross income.....................   5.77%   $ 1,050.2      6.48%     $   996.6    6.10%      $ 3,160.9    6.67%     $ 2,993.2
     Ending assets-excluding
         policy loans (1).............            73,044.8                 62,623.8                73,044.8               62,623.8
Policy loans
     Gross income.....................   6.18%        32.5      6.22%          31.4    6.11%           96.2    6.14%          92.7
     Ending assets....................             2,107.8                  2,018.8                 2,107.8                2,018.8
                                                 ---------                ---------               ---------              ---------

         Total gross income...........   5.78%   $ 1,082.7      6.47%     $ 1,028.0    6.10%      $ 3,257.1    6.66%     $ 3,085.9
         Less: investment expenses....                44.2                     59.4                   140.0                  168.3
                                                 ---------                ---------               ---------              ---------
           Net investment income .....   5.54%   $ 1,038.5      6.09%     $   968.6    5.84%      $ 3,117.1    6.29%     $ 2,917.6
                                                 =========                =========               =========              =========
</TABLE>

(1)   Cash and cash equivalents are included in invested assets in the table
      above for the purposes of calculating yields on income producing assets
      for the Company.

Three Months Ended September 30, 2003 Compared to Three Months Ended
September 30, 2002

      Net investment income increased $69.9 million from the comparable prior
year period. The increase was primarily the result of asset growth and lower
investment expenses which were partially offset by the acquisition of lower
yielding assets. Overall, the yield for the three months ended September 30,
2003, net of investment expenses, on the general account portfolio decreased to
5.54% from 6.09% for the three months ended September 30, 2002. The lower
portfolio yield was driven primarily by lower yields on investment acquisitions.
The continued drop in short-term interest rates during the year, which affects
the rate reset on floating rate assets, also contributed to the declining yield.
The change in yields was impacted by the following drivers:

      o     As of September 30, 2003 and September 30, 2002, the Company's asset
            portfolio had approximately $13 billion and $12 billion of
            floating-rate exposure (primarily LIBOR). This exposure was created
            mostly through interest rate swaps designed to match our
            floating-rate liability portfolio. As of September 30, 2003,
            approximately 90% of this floating rate exposure, excluding the
            portion that is attributable to cash and short-term investments, was
            directly offset by exposure to floating-rate liabilities. Most of
            the remaining 10% of exposure is in floating rate assets acquired
            for their relative value and is accounted for in the portfolio's
            interest rate risk management plan. As a result of the drop in
            short-term rates over the year and increase in floating rate
            exposure, the floating rate exposure reduced the portfolio yield by
            5 basis points in 2003 compared to the prior year.

      o     Certain of our tax-preferenced investments (lease residual
            management and affordable housing limited partnerships) dilute the
            Company's net portfolio yield on a pre-tax basis. For the three
            month period ended September 30, 2003, this dilutive effect was 9
            basis points, compared to 14 basis points in the comparable prior
            year period. Adjusting for taxes, net income on these investments
            increased by $2.9 million for the three month period ended September
            30, 2003 compared to the three month period ended September 30,
            2002. The inflow of new cash for the three month period ending
            September 30, 2003 was invested at rates that were below the
            portfolio rate for the prior year period. In addition, maturing
            assets rolling over into new investments at rates less favorable
            than those available in 2002 also contributed to the decline in
            yields.

      o     The inflow of new cash for the three month period ending September
            30, 2003 was invested at rates that were below the portfolio rate
            for the prior year period. In addition, maturing assets rolling over
            into new investments at rates less favorable than those available in
            2002 also contributed to the decline in yields.

      Offsetting the effects of these decreases to yields on investments was an
increase in invested assets and a reduction in investment expenses. In the three
month period ended September 30, 2003, average invested assets increased
$11,360.5 million, or 17.9%, from the prior year period. In addition, investment
expenses were reduced $15.2 million in the three month period ended September
30, 2003 compared to the prior year. Included are reductions in expenses
associated with the sale of the Company's home office real estate properties.


                                       93
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Nine Months Ended September 30, 2003 Compared to Nine Months Ended
September 30, 2002

      Net investment income increased $199.5 million from the comparable prior
year period. The increase was primarily the result of asset growth and lower
investment expenses which were partially offset by the acquisition of lower
yielding assets. Overall, the yield for the nine months ended September 30,
2003, net of investment expenses, on the general account portfolio decreased to
5.84% from 6.29% for the nine months ended September 30, 2002. The lower
portfolio yield was driven primarily by lower yields on investment acquisitions.
The continued drop in short-term interest rates during the year, which affects
the rate reset on floating rate assets, also contributed to the declining yield.
The change in yields was impacted by the following drivers:

      o     As of September 30, 2003 and September 30, 2002, the Company's asset
            portfolio had approximately $13 billion and $12 billion of
            floating-rate exposure (primarily LIBOR). This exposure was created
            mostly through interest rate swaps designed to match our
            floating-rate liability portfolio. As of September 30, 2003,
            approximately 90% of this floating rate exposure, excluding the
            portion that is attributable to cash and short-term investments, was
            directly offset by exposure to floating-rate liabilities. Most of
            the remaining 10% of exposure is in floating rate assets acquired
            for their relative value and is accounted for in the portfolio's
            interest rate risk management plan. As a result of the drop in the
            short-term rates over the year and increase in floating rate
            exposure, the floating-rate exposure reduced the portfolio yield by
            10 basis points in 2003 compared to the prior year.

      o     Certain of our tax-preferenced investments (lease residual
            management and affordable housing limited partnerships) dilute the
            Company's net portfolio yield on a pre-tax basis. For the nine month
            period ended September 30, 2003, this dilutive effect was 8 basis
            points, compared to 11 basis points in the comparable prior year
            period. However, adjusting for taxes, these investments increased
            the Company's net income by $5.3 million for the nine month period
            ended September 30, 2003 compared to the nine month period ended
            September 30, 2002.

      o     The inflow of new cash for the nine month period ending September
            30, 2003 was invested at rates that were below the portfolio rate
            for the prior year period. In addition, maturing assets rolling over
            into new investments at rates less favorable than those available in
            2002 also contributed to the decline in yields.

      Offsetting the effects of these decreases to yields on investments was an
increase in invested assets and a reduction in investment expenses. In the nine
month period ended September 30, 2003, average invested assets increased
$9,321.6 million, or 15.1%, from the prior year period. In addition, investment
expenses were reduced $28.3 million in the nine month period ended September 30,
2003 compared to the prior year. Included are reductions in expenses associated
with the sale of the Company's home office real estate properties.


                                       94
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Net Realized Investment and Other Gain/(Loss)

      The following table shows the Company's net realized investment and other
gains (losses) by asset class for the periods presented:

<TABLE>
<CAPTION>
                                                                                                          Net Realized
                                                             Gross Gain   Gross Loss      Hedging        Investment and
For the Three Months Ended September 30, 2003    Impairment  On Disposal  on Disposal   Adjustments     Other Gain/(Loss)
                                               --------------------------------------------------------------------------
                                                                             (in millions)
<S>                                                 <C>         <C>          <C>          <C>                  <C>
Fixed maturity securities (1) (2)......             $(71.2)     $ 68.3       $(24.3)      $(50.0)              $(77.2)
Equity securities (3)..................               (2.2)       18.2         (4.9)          --                 11.1
Mortgage loans on real estate...........                --        33.3        (16.4)       (13.9)                 3.0
Real estate.............................                --         4.6         (4.4)          --                  0.2
Other invested assets...................                --         2.3         (1.5)          --                  0.8
Derivatives.............................                --          --           --        (31.7)               (31.7)
                                               --------------------------------------------------------------------------
               Subtotal.................            $(73.4)     $126.7       $(51.5)      $(95.6)              $(93.8)
                                               ==========================================================================

          Amortization adjustment for deferred policy acquisition costs......................                     5.7
          Amounts credited to participating pension contractholders..........................                     7.2
          Amounts credited to the policyholder dividend obligation...........................                    22.6
                                                                                                    ---------------------
               Total.........................................................................                  $(58.3)
                                                                                                    =====================
</TABLE>

(1)   Fixed maturity securities gain on disposals includes $14.8 million of
      gains from previously impaired securities.
(2)   Fixed maturity securities loss on disposals includes $0.3 million of
      credit related losses.
(3)   Equity securities gain on disposal includes $1.5 million of gains from
      equity securities received as settlement compensation from an investee
      whose securities had previously been impaired.

<TABLE>
<CAPTION>
                                                             Gross Gain   Gross Loss      Hedging    Net Realized Investment
For the Nine Months Ended September 30, 2003    Impairment   on Disposal  on Disposal   Adjustments   and Other Gain/(Loss)
                                               -----------------------------------------------------------------------------
                                                                                (in millions)
<S>                                                <C>          <C>         <C>          <C>                  <C>
Fixed maturity securities (1) (2).......           $(386.9)     $397.1      $ (68.9)     $(204.8)             $(263.5)
Equity securities.......................             (29.3)       52.8        (10.2)          --                 13.3
Mortgage loans on real estate...........                --        54.1        (28.2)       (46.7)               (20.8)
Real estate.............................                --       244.7         (7.3)          --                237.4
Other invested assets...................             (10.3)       16.6         (7.5)          --                 (1.2)
Derivatives.............................                --          --           --         95.4                 95.4
                                               -----------------------------------------------------------------------------
               Subtotal.................           $(426.5)     $765.3      $(122.1)     $(156.1)               $60.6
                                               =============================================================================

          Amortization adjustment for deferred policy acquisition costs......................                    (9.5)
          Amounts charged to participating pension contractholders...........................                     9.0
          Amounts charged to the policyholder dividend obligation............................                    34.0
                                                                                                    ------------------------
               Total.........................................................................                 $  94.1
                                                                                                    ========================
</TABLE>

(1)   Fixed maturity securities gain on disposals includes $64.0 million of
      gains from previously impaired securities.
(2)   Fixed maturity securities loss on disposals includes $23.3 million of
      credit related losses.
(3)   Equity securities gain on disposal includes $1.5 million of gains from
      equity securities received as settlement compensation from an investee
      whose securities had previously been impaired.

      The hedging adjustments in the fixed maturities and mortgage loans asset
classes are non-cash adjustments representing the amortization or reversal of
prior fair value adjustments on assets in those classes that were or are
designated as hedged items in fair value hedges. When an asset or liability is
so designated, its cost basis is adjusted in response to movements in interest
rates. These adjustments are non-cash and reverse with the passage of time as
the asset or liability and derivative mature. The hedging adjustments on the
derivatives represent non-cash adjustments on derivative instruments and on
assets and liabilities designated as hedged items reflecting the change in fair
value of those items.

      For the three and nine month periods ended September 30, 2003 net realized
investment and other gains/(losses) was a loss of $58.3 million and a gain of
$94.1 million, respectively. For the same time periods, gross losses on
impairments and on disposal of investments - including bonds, equities, real
estate, mortgages and other invested assets was $124.9 million and $548.6
million, respectively, excluding hedging adjustments.


                                       95
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      For the three and nine month periods ended September 30, 2003, we realized
$68.3 million and $397.1 million of gains on disposal of fixed maturities
excluding hedging adjustments, respectively. These gains resulted from managing
our portfolios for tax optimization and ongoing portfolio positioning, as well
as $12.6 million and $57.9 million, respectively, of prepayments and
approximately $14.8 million and $64.0 million, respectively, from recoveries on
sales of previously impaired securities.

      For the three and nine month periods ended September 30, 2003, we realized
$24.3 million and $68.9 million, respectively, of losses upon disposal of bonds
excluding hedging adjustments. We generally intend to hold securities in
unrealized loss positions until they mature or recover. However, we do sell
bonds under certain circumstances such as when new information causes us to
change our assessment of whether a bond will recover or perform according to its
contractual terms, in response to external events (such as a merger or a
downgrade) that result in investment guideline violations (such as single issuer
or overall portfolio credit quality limits), in response to extreme catastrophic
events (such as September 11, 2001) that result in industry or market wide
disruption, or to take advantage of tender offers. Sales generate both gains and
losses.

      The Company has a process in place to identify securities that could
potentially have an impairment that is other than temporary. This process
involves monitoring market events that could impact issuers' credit ratings,
business climate, management changes, litigation and government actions, and
other similar factors. This process also involves monitoring late payments,
downgrades by rating agencies, key financial ratios, financial statements,
revenue forecasts and cash flow projections as indicators of credit issues.

      At the end of each quarter, our Investment Review Committee reviews all
securities where market value is less than ninety percent of amortized cost for
three months or more to determine whether impairments need to be taken. This
committee includes the head of workouts, the head of each industry team, the
head of portfolio management, the Chief Investment Officer and the Corporate
Risk Officer who reports to the Chief Financial Officer. The analysis focuses on
each company's or project's ability to service its debts in a timely fashion and
the length of time the security has been trading below cost. The results of this
analysis are reviewed by both our external auditors and the Life Company's
Committee of Finance, a subcommittee of the Life Company's Board of Directors,
quarterly. This quarterly process includes a fresh assessment of the credit
quality of each investment in the entire fixed maturities portfolio.

      The Company considers relevant facts and circumstances in evaluating
whether the impairment of a security is other than temporary. Relevant facts and
circumstances considered include (1) the length of time the fair value has been
below cost; (2) the financial position of the issuer, including the current and
future impact of any specific events; and (3) the Company's ability and intent
to hold the security to maturity or until it recovers in value. To the extent
the Company determines that a security is deemed to be other than temporarily
impaired, the difference between amortized cost and fair value would be charged
to earnings.

      There are a number of significant risks and uncertainties inherent in the
process of monitoring impairments and determining if an impairment is other than
temporary. These risks and uncertainties include (1) the risk that our
assessment of an issuer's ability to meet all of its contractual obligations
will change based on changes in the credit characteristics of that issuer, (2)
the risk that the economic outlook will be worse than expected or have more of
an impact on the issuer than anticipated, (3) fraudulent information could be
provided to our investment professionals who determine the fair value estimates
and other than temporary impairments, and (4) the risk that new information
obtained by us or changes in other facts and circumstances lead us to change our
intent to hold the security to maturity or until it recovers in value. Any of
these situations could result in a charge to earnings in a future period.

      As disclosed in our discussion of the Results of Operations in this MD&A,
the Company recorded losses due to other than temporary impairments of fixed
maturity securities for three month period ended September 30, 2003 of $74.2
million (including impairment losses of $71.2 million and $3.0 million of
previously recognized gains where the bond was part of a hedging relationship).
The following list shows the largest losses recognized during the quarter, the
related circumstances giving rise to the loss and a discussion of how those
circumstances impacted other material investments held. Unless noted otherwise,
all of the items shown are impairments of securities held at September 30, 2003,
including hedging adjustments.

Impairments and Losses on Disposals - Three Months Ended September 30, 2003

      o     $26.4 million on private fixed maturity securities secured by
            aircraft leased by a large U.S. airline operating in bankruptcy.
            This airline is seeking to reduce its lease rates as a small part of
            its larger efforts to reduce costs and emerge from bankruptcy. We
            continue to actively negotiate with the entity and this impairment
            is based on the expected reduction in the lease rates and observed
            market prices in the 3rd quarter on public bonds.


                                       96
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      o     $14.9 million on private fixed maturities of a holding company
            structure created to develop three natural gas fired power projects
            in the southwestern United States that were initiated to respond to
            the California power crisis. The subsequent drop in power demand and
            prices made this company's business plan uneconomic. Negotiations
            with the company to restructure the debt into a stronger entity have
            led to further impairments in our security. We have one other $50
            million loan to a power company that similarly began construction on
            a new plant to sell power into California. It has successfully
            redeployed its turbines elsewhere and we do not expect a loss on
            that position.

      o     $13.2 million on private fixed maturity securities relating to an
            Australian mining company. The company filed the equivalent of
            Chapter 11 due to weaker commodity prices, operational difficulties,
            and losses on currency transactions. Attempts to sell assets at
            prices sufficient to pay our debt have not been successful. As a
            result, the investment has been written off entirely. While lower
            commodity prices affect a broad range of credits, the unique
            circumstances of this company are not present in our other
            investments.

      o     $7.2 million on public fixed maturity securities relating to an
            asset backed pool of franchise loans primarily focused in the gas
            station/convenience store sector. The sector has continued to be hit
            hard by higher delinquencies and lower recoveries on the underlying
            loans. Higher delinquencies and lower recovery values has led to
            further impairments on these securities. We have $142 million of
            other exposure to franchise loan ABS, all of which are senior
            tranches, and one other exposure requiring a $4 million impairment
            in the third quarter.

      Of the $24.3 million of realized losses on sales of fixed maturity
securities for the three months ended September 30, 2003, there were no
significant credit losses. Most of the sales were related to general portfolio
management, largely due to redeploying high quality, liquid public bonds into
more permanent investments and the losses resulted from increasing interest
rates during the quarter. The Sales with losses in excess of $1.0 million were:

      o     $2.1 million on the sale of public bonds of a large U.S. based bank.
            The loss was entirely due to a rise in Treasury rates since the time
            of purchase.

      o     $5.3 million on the sale of U.S. agency debentures. The loss was
            almost entirely due to a rise in Treasury rates since the time of
            purchase.

Impairments and Losses on Disposals - Nine Months Ended September 30, 2003

      As disclosed in our discussion of the Results of Operations in this MD&A,
the Company recorded losses due to other than temporary impairments of fixed
maturity securities for the first nine months of 2003 of $408.8 million
(including impairment losses of $386.9 million, and $21.9 million of previously
recognized gains where the bond was part of a hedging relationship). The
following list shows the largest losses recognized year to date, the related
circumstances giving rise to the loss and a discussion of how those
circumstances impacted other material investments held. Unless noted otherwise,
all of the items shown are impairments of securities held at September 30, 2003,
including hedging adjustments.

      o     $37.6 million (including an impairment loss of $37.3 million and
            $0.3 million in previously recognized gains where the bonds were
            part of a hedging relationship) on public fixed maturity securities
            relating to a large, national farmer-owned dairy co-operative.
            Margins have been squeezed due to a supply/demand imbalance, high
            input costs and high leverage, due in part to a recent acquisition.
            Despite a large favorable outcome on a lawsuit, depressed commodity
            prices in this environment have continued to put pressure on the
            company to rationalize their operations as was evident in their
            recently released annual financial statements. Given our
            subordinated position in the capital structure, and unlikely
            improvement near term, we have impaired the security to the market
            level. We have no other loans to dairy companies that are impacted
            by this same combination of factors. We have recovered $5.3 million
            on subsequent sales of this security.

      o     $36.1 million on private and public fixed maturity securities
            secured by aircraft leased by a large U.S. airline. This airline is
            seeking to reduce its lease rates as a small part of its larger
            efforts to reduce costs and emerge from bankruptcy. These
            impairments are based on public quoted prices for the public
            securities and the appraised values of the aircraft in conjunction
            with the expected restructured lease rates on the private
            securities. While we hold other investments in the aircraft
            industry, these circumstances are unique to this issuer.


                                       97
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      o     $27.3 million on public fixed maturity securities relating to a
            large North American transportation provider to a variety of
            industries that has struggled to emerge from bankruptcy due to
            litigation with a subsidiary, tax claims by the IRS, and most
            recently, a claim by a regulatory agency. We had further impaired
            the security and the reorganization out of bankruptcy has occurred.
            These circumstances are unique to this issuer. We have recovered
            $26.4 million on subsequent sales of this security.

      o     $29.8 million on private fixed maturity securities relating to an
            Australian mining company. The company filed the equivalent of
            Chapter 11 due to weaker commodity prices, operational difficulties,
            and losses on currency transactions. Attempts to sell assets at
            prices sufficient to pay our debt have not been successful. As a
            result, the investment has been written off entirely. While lower
            commodity prices affect a broad range of credits, the unique
            circumstances of this company are not present in our other
            investments.

      o     $26.3 million (including an impairment loss of $23.2 million and
            $3.1 million in previously recognized gains where the bonds were
            part of a hedging relationship) on public fixed maturity securities
            relating to a special purpose company created to sublease aircraft
            to two major US airlines. This investment is the subordinated
            tranche in a multi-tier structure of an Enhanced Equipment Trust
            Certificate (EETC). One of the airlines is in bankruptcy and has
            indicated that it will not honor the original lease rates on the
            aircraft in this investment. Hence, with the loan exceeding the
            current value of the securities, we have impaired the security to
            the market level. While we do have an investment in the senior
            tranche of this EETC, the senior tranche exposure is still less than
            the current market value of the underlying planes and the senior
            tranche enjoys an 18 month liquidity facility. Hence we do not
            anticipate a loss on the senior tranche.

      o     $25.0 million on private fixed maturity securities (including an
            impairment loss of $19.8 million and $5.2 million in previously
            recognized gains where the bond was part of a hedging relationship)
            on a toll road where a new competing road has decreased the traffic
            on the toll road and hence the project has been unable to service
            its debt. We have no other holdings affected by this situation.

      o     $22.9 million on private fixed maturities of a holding company
            structure created to develop three natural gas fired power projects
            in the southwestern United States that were initiated to respond to
            the California power crisis. The subsequent drop in power demand and
            prices made this company's business plan uneconomic. Negotiations
            with the company to restructure the debt into a stronger entity led
            to an impairment in our security. We have one other $50 million loan
            to a power company that similarly began construction on a new plant
            to sell power into California. It has successfully redeployed its
            turbines elsewhere and we do not expect a loss on that position.

      o     $20.6 million (including an impairment loss of $18.2 million and
            $2.4 million in previously recognized gains where the bond was part
            of a hedging relationship) on public fixed maturity securities
            relating to an asset backed pool of franchise loans primarily
            focused in the gas/convenience store sector. The sector has
            continued to be hit hard by higher delinquencies and lower
            recoveries on the underlying loans. Higher delinquencies and lower
            recovery values led to impairments on these securities. We have $142
            million of other exposure to franchise loan ABS, all of which are
            senior tranches, and one other exposure requiring a $4 million
            impairment in the third quarter.

      o     $14.1 million on public fixed maturity securities relating to a
            subordinated holding company structure comprised of ownership
            interests in three power generation facilities in the western US.
            Due to the severe overcapacity in the power markets and the lack of
            an off take provider for the potential power generated from the
            plants, this subordinated interest in the facilities was not
            refinanced and hence we wrote off the investment completely. The
            overcapacity in the power markets has put stress on all power
            producers as we discuss in our sector commentary.

      o     $11.1 million on private fixed maturity securities on a Chilean
            based conglomerate. Attempts to renegotiate the agreement have not
            materialized and the likelihood of receiving any recovery is remote.
            We have completely written off the investment. The circumstances
            surrounding this investment are unique as the borrower has
            demonstrated a lack of willingness to repay the debt on this
            investment.

      o     $11.0 million on public fixed maturity securities (including an
            impairment loss of $9.2 million and $1.8 million in previously
            recognized gains where the bond was part of a hedging relationship)
            of a utility brought into the bankruptcy of its parent that suffered
            from a significant amount of merchant energy exposure. Our bonds are
            secured by a pump storage facility. We have $48.9 million carrying
            value of bonds at the parent that were also impaired.


                                       98
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      o     $11.0 million on private fixed maturity securities secured by
            aircraft leased by a large U.S. airline. This airline has
            renegotiated its lease rates as a small part of its larger efforts
            to reduce costs to avoid bankruptcy. This impairment is based on the
            reduction in the lease rates. We have $57.8 million of other ETC's
            backed by leases to this airline. The airline has not requested a
            change in the lease rates on the aircraft backing these investments.
            While we hold other investments in the airline industry and the
            industry has been under extreme pressure as we discuss in our sector
            commentary, these issues are unique to this borrower.

      o     $9.7 million on public fixed maturity securities relating to a
            manufacturer of composite and building materials. This company has
            struggled to emerge from bankruptcy due to numerous lawsuits and a
            disagreement between the banks and noteholders. Hence the price of
            these securities has declined and we are further impairing them down
            to current market levels. These circumstances are unique to this
            issuer.

      o     $9.6 million on public fixed maturity securities relating to an
            unregulated power and pipeline energy company that became insolvent
            due to a fall in profitability in its merchant energy business
            downgrades from the rating agencies and a lack of liquidity due to
            the call on cash collateral requirements after the downgrades. We
            have impaired the security to market levels. The overcapacity in the
            power markets have put stress on all power producers as we discuss
            in our sector commentary.

      o     $9.4 million on public fixed maturity securities relating to a
            special purpose financing company which owns an interest in a gas
            fired power plant in the UK with long-term fixed price contracts
            that are significantly above market in today's depressed pricing
            environment. In early 2003, the banks decided to pursue a fire sale
            of the power plant. We have impaired this loan to the discounted
            value of our likely recovery from such a sale. We have two other
            loans with a total carrying value of $99.6 million to companies
            participating in the UK power market. $59.3 million is backed by a
            UK pump storage facility investment where debt service coverage has
            been reduced by the weak environment for power in the U.K., but we
            continue to anticipate positive debt service coverage for this
            investment. $40.3 million is a loan to the owner of a UK regional
            electric company. Regional electric companies have monopolies to
            distribute and supply power to their regions thus are less affected
            by the over supply of power.

      Of the $68.9 million of realized losses on sales of fixed maturity
securities for the nine months ended September 30, 2003, $23.3 million was
credit related, $41.5 million arose from the sale of 9 securities with $1.0
million or more of realized loss. The only significant realized losses year to
date were $16.7 million on the sale of the bonds of a major healthcare service
provider (late in the first quarter) the SEC announced that they had discovered
massive accounting fraud at that company and thus its bond and stock prices
plummeted; due to this significant event and the uncertainty over the future of
the company due to the ongoing SEC investigation, we sold our position), and
$4.9 million on the sale of bonds of a power provider with a large exposure to
the merchant energy markets. As we became more concerned that the banks would
not renew their bank lines to this company, we sold most of our position and
impaired the remaining position that was subsequently sold in early July. These
were the only sales of significance that we consider credit losses, i.e. sold at
less than 80% of amortized cost. All other sales were related to general
portfolio management, including the sale of a number of below investment grade
bonds to maintain our exposure below 10% of invested assets on a statutory
basis. The following are the losses on sales over $1.0 million:

      o     $16.7 million credit loss on the sale of public bonds of a major
            healthcare service provider as referred to in above paragraph.

      o     $6.0 million on the sale of U.S. agency debentures. The loss was
            almost entirely due to a rise in Treasury rates since the time of
            purchase.

      o     $4.9 million credit loss on the sale of public bonds of a power
            provider referred to in the above paragraph.

      o     $3.3 million on the sale of public bonds of a utility holding
            company where our position exceeded our single credit limits due to
            a downgrade of the company. This sale brought our holdings of this
            company in compliance within our limits.

      o     $3.1 million on the sale of public bonds of an oil & gas company.
            This transaction was executed to reduce its below investment grade
            exposure.

      o     $2.2 million on the sale of public bonds of an oil & gas pipeline
            company in order to maintain our below investment grade holdings
            below 10% of invested assets on a Statutory basis.

      o     $2.1 million on the sale of public bonds of a large U.S. based bank.
            The loss was entirely due to a rise in Treasury rates since the time
            of purchase.


                                       99
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      o     $2.1 million on the sale of public bonds of an unregulated power
            generating company. This bond was sold after a downgrade created a
            credit limit violation.

      o     $1.1 million on the sale of public bonds of another power provider
            with a significant exposure to the merchant energy markets and our
            concern over their ability to renew their bank lines.

      There were no other sales with losses more than $1 million and no other
sales of bonds at less than 80% of amortized cost, which we would consider as
credit losses. These sales helped reduce our below investment grade holdings and
accomplished other portfolio objectives.

      The Company recorded losses due to other than temporary impairments of CDO
equity and other invested assets of $10.3 million for the nine month period
ended September 30, 2003. No such losses were incurred in the quarter. Equity in
these CDO's take the first loss risk in a pool of high yield debt and hence
under perform in a high yield default environment. We have a total remaining
carrying value of $45.1 million and $48.7 million of CDO equity as September 30,
2003 and December 31, 2002, which is currently supported by expected cash flows.

      The Company also recognized losses on other than temporary impairments of
common stock of $2.2 million and $29.3 million for the three and nine month
periods ended September 30, 2003, respectively, as the result of market values
falling below cost for more than six months.

      The Company recorded a gain of $3.0 million and a loss of $20.8 million on
mortgage loans for the three and nine month periods ended September 30, 2003 (of
which $13.9 million and $46.7 million, respectively were losses on hedging
adjustments). Included are losses of $7.7 million and $25.6 million respectively
for the three and nine months ended September30, 2003, associated with losses on
agriculture mortgages.

       There were also gains of $18.2 million and $52.8 million on the sale of
equity securities as part of our overall investment strategy of using equity
gains to minimize credit losses in the long term, gains of $2.3 million and
$16.6 million from the sale of other invested assets, and gains of $4.6 million
and $244.7 million resulting from the sale of real estate for the three and nine
month periods ended September 30, 2003, respectively. Net derivative activity
resulted in a loss of $31.7 million for the three months ended September 30,
2003 and a gain of $95.4 million for the nine months ended September 30, 2003,
resulting from a slightly larger impact from interest rate changes on the
Company's fair value of hedged and non-hedged items in comparison to the changes
in fair value of its derivatives.

      For the three and nine month period ended September 30, 2002, net realized
investment and other losses were $30.7 million and $255.4 million, respectively.
Gross losses on impairments and on disposal of investments - including bonds,
equities, mortgages, real estate, and other invested assets were $173.0 million
and $565.9 million, respectively, excluding hedging adjustments.

     The Company recorded losses due to other than temporary impairments of
fixed maturities of $103.9 million and $344.7 million for the three and nine
months periods ended September 30, 2002, excluding hedging adjustments. The
primary other than temporary impairments on fixed maturities for the nine months
ended September 30, 2002 were $45.5 million on securities issued by the holding
company of a large domestic power producer that was downgraded to below
investment grade status in July 2002 due to liquidity concerns, $18.4 million on
securities of an Australian power project that failed to produce benefits
expected from the deregulation of that country's power industry, $53.2 million
on structured financings due as a result of ongoing negotiations with a borrower
to restructure debt, $20.0 million on a redeemable preferred stock of a large
domestic farm cooperative due to the cyclical nature of the business and a heavy
debt load, $19.2 million on redeemable preferred stock of a technology based
manufacturer of engineering products with a tight liquidity position, and $55.6
million on a large energy company that filed for bankruptcy in late 2001.
Writedowns of CBO/CDO fixed maturity investments and other invested assets were
$57.1 million for the nine month period ended September 30, 2002.


                                      100
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Liquidity and Capital Resources

      Liquidity describes the ability of a company to generate sufficient cash
flows to meet the immediate needs to facilitate business operations. John
Hancock Financial Services, Inc. (the Company) is an insurance holding company.
The assets of the Company consist primarily of the outstanding capital stock of
the Life Company, John Hancock Canadian Holdings Limited (Maritime Life's
parent) and investments in other international subsidiaries. The Company's cash
flow primarily consists of dividends from its operating subsidiaries and
proceeds from the Company's debt offerings offset by expenses, shareholder
dividends and stock repurchases. As a holding company, the Company's ability to
meet its cash requirements, including, but not limited to, paying interest on
any debt, paying expenses related to its affairs, paying dividends on its common
stock and repurchasing the Company's common stock pursuant to the Board of
Director's approved plan, substantially depends upon dividends from its
operating subsidiaries.

      State insurance laws generally restrict the ability of insurance companies
to pay cash dividends in excess of prescribed limitations without prior
approval. The Life Company's limit is the greater of 10% of the statutory
surplus or the prior calendar year's statutory net gain from operations of the
Life Company. The ability of the Life Company, JHFS' primary operating
subsidiary, to pay shareholder dividends is and will continue to be subject to
restrictions set forth in the insurance laws and regulations of Massachusetts,
its domiciliary state. The Massachusetts insurance law limits how and when the
Life Company can pay shareholder dividends. The Life Company, in the future,
could also be viewed as being commercially domiciled in New York. If so,
dividend payments may also be subject to New York's holding company act as well
as Massachusetts law. JHFS currently does not expect such regulatory
requirements to impair its ability to meet its liquidity and capital needs.
However, JHFS can give no assurance it will declare or pay dividends on a
regular basis.

      The Commissioner of Insurance for the Commonwealth of Massachusetts
previously approved, and the Life Company paid, dividends to JHFS during the
nine month period ended September 30, 2003 in the amount of $114.5 million. This
dividend was not classifies as extraordinary by state regulators.

      Canadian insurance laws generally restrict the ability of insurance
companies to pay cash dividends in excess of prescribed limitations without
prior approval. Maritime Life, our Canadian life insurance subsidiary, is
subject to restrictions on dividend payments to its holding company, John
Hancock Canadian Holdings, Ltd, by Canadian regulators. Maritime Life may not
make dividend payments which would make its minimum continuing capital and
surplus ratio fall below 150%, as required by the Office of the Superintendent
of Financial Institutions. Maritime Life's minimum continuing capital and
surplus ratio is measured annually, and was 192% as of December 31, 2002.

      Sources of cash for the Company's insurance subsidiaries are from
premiums, deposits and charges on policies and contracts, investment income,
maturing investments, and proceeds from sales of investment assets. Our
liquidity requirements relate principally to the liabilities associated with
various insurance, annuity, and structured investment products, and to the
funding of investments in new products, processes, and technology and general
operating expenses. Product liabilities include the payment of benefits under
insurance, annuity and structured investment products and the payment of policy
surrenders, withdrawals and policy loans. The Company periodically adjusts its
investment policy to respond to changes in short-term and long-term cash
requirements and provide adequate funds to pay benefits without forced sales of
investments.

      As noted above on September 28, 2003, JHFS entered into a definitive
merger agreement with Manulife. Until the closing of the transaction, the
Company will continue to operate independently and does not expect the proposed
merger to have a negative impact on financial condition, liquidity or sales.
Following the announcement of the proposed merger, Standard and Poor's, Moody's,
A.M. Best and Fitch affirmed all ratings. In addition, Standard & Poor's noted
that "the `A' long-term counterparty credit and senior debt ratings on John
Hancock Financial Services Inc., a holding company for its U.S. and Canadian
operating insurance companies, have been placed on CreditWatch with positive
implications." Dominion Bond Rating Service placed John Hancock Financial
Services' corporate rating of A (high) and Maritime Life's long term ratings
"Under Review - Positive." And Maritime Life's financial strength ratings were
placed on "Credit Watch Positive" by Moody's and A.M. Best.

      The liquidity of our insurance operations is also related to the overall
quality of our investments. As of September 30, 2003, $47,907.0 million, or
89.2% of the fixed maturity securities held by us and rated by Standard & Poor's
Ratings Services, a division of the McGraw-Hill Companies, Inc. (S&P) or the
National Association of Insurance Commissioners were rated


                                      101
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                      JOHN HANCOCK FINANCIAL SERVICES, INC.

investment grade (BBB- or higher by S&P, Baa3 or higher for Moody's, or 1 or 2
by the National Association of Insurance Commissioners). The remaining $5,829.5
million, or 10.8 % of fixed maturity investments, were rated non-investment
grade. For additional discussion of our investment portfolio see the General
Account Investments section of this Management's Discussion and Analysis of
Financial Condition and Results of Segment Operations.

      We employ an asset/liability management approach tailored to the specific
requirements of each of our product lines. Each product line has an investment
strategy based on the specific characteristics of the liabilities in the product
line. As part of this approach, we develop investment policies and operating
guidelines for each portfolio based upon the return objectives, risk tolerance,
liquidity, and tax and regulatory requirements of the underlying products and
business segments.

       Net cash provided by operating activities was $1,743.1 million and
$1,882.5 million for the nine months ended September 30, 2003 and 2002,
respectively. The $139.4 million decrease in cash provided by operating
activities for the first nine months in 2003 compared to the same period in 2002
resulted primarily from increases in policyholder payments, expenses, and other
assets net of other liabilities, offset by increases to premium and fee
receipts.

      Net cash used in investing activities was $3,831.6 million and $5,092.3
million for the nine months ended September 30, 2003 and 2002, respectively. The
$1,260.7 million decrease in cash used in the first nine months of 2003 as
compared to the same period in 2002 resulted from a $887.6 million cash inflow
from the sale of Home Office properties in the first quarter of 2003 and a
$662.0 million reduction in net acquisitions of fixed maturities offset somewhat
by a shift from net sales to net acquisitions of equities and other investments
during the nine months ended September 30, 2003 as compared to the same period
in the prior year.

       Net cash provided by financing activities was $2,487.9 million and
$2,964.0 million for the nine months ended September 30, 2003 and 2002,
respectively. The $476.1 million decrease in the first nine months of 2003 as
compared to the same period in 2002 resulted from a $397.0 million decrease in
deposits and a $1,016.7 million increase in cash payments made on withdrawals of
universal life insurance and investment-type contracts offset somewhat by $769.4
million in funds from the Consumer Notes program initiated in the second half of
2002, and a $359.7 million decline in treasury stock acquired due to the
suspension of activity under the stock repurchase program. Deposits on universal
life insurance and investment-type contracts exceeded withdrawals by $1,773.9
million and $3,187.6 million for the nine months ended September 30, 2003 and
2002, respectively.

      On October 26, 2000, the Company announced that its Board of Directors
authorized a stock repurchase program, with no termination date, under which the
Company was authorized to purchase up to $500 million of its outstanding common
stock. On August 6, 2001, the Company's Board of Directors authorized a $500
million increase to the stock repurchase program. On June 21, 2002, the
Company's Board of Directors authorized a second increase of $500 million to the
stock repurchase program, bringing the total amount authorized to be used to
repurchase Company stock to $1.5 billion. Under the stock repurchase program,
purchases have been and will be made from time to time, depending on market
conditions, business opportunities and other factors, in the open market or
through privately negotiated transactions. Through September 30, 2003, the
Company has repurchased 30.0 million shares with a total cost of $1,069.0
million, of which 0.4 million shares were repurchased in 2003 at a cost of $11.8
million. The 2003 repurchase activity consisted primarily of the acquisition of
certain restricted stock from key executives of the Company. The proceeds from
some of these purchases were used by the executives to repay loans under a
discontinued stock ownership and loan program. The outstanding loans under that
program, which were grandfathered under the Sarbanes-Oxley Act of 2002, have
been repaid in full at the request of the Company's Board of Directors. At
September 30, 2003, the Company was not actively repurchasing its common stock
but will continue to assess whether and when it might resume repurchases of its
common stock under the stock repurchase program.

      Cash flow requirements are also supported by a committed line of credit of
$1.0 billion, through a syndication of banks including Fleet National Bank,
JPMorgan Chase, Citicorp USA, Inc., The Bank of New York, The Bank of Nova
Scotia, Fleet Securities, Inc. and JPMorgan Securities, Inc., and an effective
shelf registration statement which initially provided for the issuance, from
time to time, of up to $1 billion of the Company's debt and equity securities.
The line of credit agreement provides for two facilities: one for $500 million
pursuant to a 364-day commitment (renewed effective July 25, 2003) and a second
multi-year facility for $500 million (renewable in 2005). The line of credit is
available for general corporate purposes. The line of credit agreement has no
material adverse change clause, and includes, among others, the following
covenants: minimum requirements for JHFS shareholder's equity, maximum limit on
the capitalization ratio and a negative pledge clause (with exceptions) as well
as limitations on subsidiary debt. The line of credit also contains
cross-acceleration provisions. The fee structure is determined by the rating
levels of JHFS or the life operating company such that a downgrade would result
in higher fees. To date, we have not borrowed any amounts under the line of
credit. On November 29, 2001, JHFS sold, under


                                      102
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

the $1.0 billion shelf registration statement, $500.0 million in 7-year senior
unsecured notes at a coupon of 5.625% with the proceeds used for general
corporate purposes. Covenants contained in this issue include, among others,
limitations on the disposition of and liens on the stock of the Life Company.
This issue also contains cross-acceleration provisions. The remaining capacity
of the shelf registration is currently $500.0 million.

      As of September 30, 2003, we had $1,799.1 million of aggregate principal
amount of debt outstanding consisting of $499.0 million of medium-term bonds,
$447.5 million of surplus notes, $292.7 million of Canadian debt, $52.7 million
of other notes payable (excluding $209.0 million in non-recourse debt for
Signature Fruit and a Signature Funding CDO) and $189.9 million of commercial
paper. Also not included here is the $108.2 million SFAS 133 fair value
adjustment to interest rate swaps held for the Surplus Notes. During the nine
months ended September 30, 2003, the Company issued in aggregate $1,565.0
million in commercial paper, of which $189.9 million was outstanding at
September 30, 2003. In addition, the Company has outstanding $1,059.6 million of
consumer notes which are redeemable upon the death of the holder, subject to an
annual overall program redemption limitation of 1% of the aggregate securities
outstanding, or an individual redemption limitation of $200,000 of aggregate
principal, and mature at various dates in the future. Covenants in this program
include, among others, limitations on liens.

      $275 million in letters of credit for JH Reassurance Company, guaranteed
by the Company, are subject to rating triggers that require the posting of
deposits (within three business days) as additional collateral if the ratings of
JHFS or the Life Company fall below designated rating levels. Currently, JHFS
and the Life Company's ratings are several levels away from a triggering event
for the guaranteed letters of credit. Failure to make such deposit under one or
more of the guaranteed letters of credit could trigger the cross-acceleration
provisions in other financing agreements, including the line of credit
referenced above. Certain of these guaranteed letters of credit incorporate the
financial covenants from the line of credit as well as contain cross-default and
cross-acceleration provisions.

      The Company's primary operating subsidiary is John Hancock Life Insurance
Company. The risk-based capital standards for life insurance companies, as
prescribed by the National Association of Insurance Commissioners, establish a
risk-based capital ratio comparing adjusted surplus to required surplus for each
of our United States domiciled insurance subsidiaries. If the risk-based capital
ratio falls outside of acceptable ranges, regulatory action may be taken ranging
from increased information requirements to mandatory control by the domiciliary
insurance department. The risk-based capital ratios are reported annually and
monitored continuously. The Company's risk-based capital ratios of all our
insurance subsidiaries as of year end were significantly above the ranges that
would require regulatory action.

      The following table summarizes the Company's information about contractual
obligations and other commercial commitments by due date and expiration date as
of September 30, 2003. Contractual obligations of the Company are those
obligations fixed by agreement as to dollar amount and date of payment. Other
commercial commitments are those commitments entered into by the Company with
known expiration dates. These obligations are inputs into the Company's asset
liability management system described elsewhere in this document.

                Contractual Obligations as of September 30, 2003

<TABLE>
<CAPTION>
                                                                             Payments due by period
                                                     -----------------------------------------------------------------------
                                                                    Less than 1
                                                         Total          year       1-3 years     4-5 years   After 5 years
                                                     -----------------------------------------------------------------------
                                                                                 (in millions)
<S>                                                    <C>           <C>            <C>           <C>             <C>
Debt...............................................    $ 1,690.9     $   79.0       $  270.0      $   24.7        $ 1,317.2
Consumer notes.....................................      2,055.9         10.3          149.9         241.4          1,654.3
GIC's..............................................      6,865.2        635.1        3,004.3       1,400.8          1,825.0
Funding agreements.................................     14,253.5        400.4        4,983.0       3,897.3          4,972.8
Institutional structured settlements...............      1,814.0          7.0           38.2          40.0          1,728.8
Annuity certain contracts..........................      1,652.3        239.1          446.8         379.2            587.2
Investment commitments.............................      2,404.2      2,404.2             --            --               --
Other insurance liabilities........................         45.9         45.9             --            --               --
Operating lease obligations........................        930.3         35.8          203.5         182.4            508.6
Other long-term obligations........................        256.4         25.7           92.9          81.1             56.7
                                                     -----------------------------------------------------------------------
     Total contractual cash obligations............    $31,968.6     $3,882.5       $9,188.6      $6,246.9        $12,650.6
                                                     =======================================================================
</TABLE>


                                      103
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

              Other Commercial Commitments as of September 30, 2003

<TABLE>
<CAPTION>
                                                                             Payments due by period
                                                     ----------------------------------------------------------------------
                                                     Total Amounts   Less than 1
                                                       Committed         year       1-3 years     4-5 years    Over 5 years
                                                     ----------------------------------------------------------------------
                                                                                 (in millions)
<S>                                                           <C>          <C>          <C>            <C>          <C>
Lines of credit....................................             --           --           --           --           --
Standby letters of credit..........................           $1.8         $1.7         $0.1           --           --
Guarantees.........................................            0.3          0.3           --           --           --
Standby repurchase obligations.....................             --           --           --           --           --
Other commercial commitments.......................            0.1          0.1           --           --           --
Other commitments..................................            0.7          0.7           --           --           --
                                                     ----------------------------------------------------------------------
     Total other commercial commitments............           $2.9         $2.8         $0.1           --           --
                                                     ======================================================================
</TABLE>

      We maintain reinsurance programs designed to protect against large or
unusual losses. Based on our periodic review of our reinsurers' financial
statements, financial strength ratings and reputations in the reinsurance
marketplace, we believe that our reinsurers are financially sound, and,
therefore, that we have no significant exposure to uncollectible reinsurance in
excess of uncollectible amounts recognized in our consolidated financial
statements.

      Given the historical cash flow of our subsidiaries and current financial
results, management believes that the cash flow from the operating activities
over the next year will provide sufficient liquidity for our operations, as well
as to satisfy debt service obligations and to pay other operating expenses.
Although we anticipate that we will be able to meet our cash requirements, we
can give no assurances in this regard.


                                      104
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Forward-Looking Statements

      The statements, analyses, and other information contained herein relating
to trends in John Hancock Financial Services, Inc.'s, (the Company's) operations
and financial results, the markets for the Company's products, the future
development of the Company's business, and the contingencies and uncertainties
to which the Company may be subject, as well as other statements including words
such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "will,"
"should," "may," and other similar expressions, are "forward-looking statements"
under the Private Securities Litigation Reform Act of 1995. Such statements are
made based upon management's current expectations and beliefs concerning future
events and their potential effects on the Company. Future events and their
potential effects on the Company may not be those anticipated by management. The
Company's actual results may differ materially from the results anticipated in
these forward-looking statements.

      These forward-looking statements are subject to risks and uncertainties
including, but not limited to, the risks that (1) a significant downgrade in our
ratings for claims-paying ability and financial strength may lead to policy and
contract withdrawals and materially harm our ability to market our products; (2)
new laws and regulations, including the recently enacted Sarbanes-Oxley Act of
2002, or changes to existing laws or regulations, (including, but not limited
to, those relating to the Federal Estate Tax Laws and the proposed Bush
Administration tax and savings initiatives), and the applications and
interpretations given to these laws and regulations, may adversely affect the
Company's sales of insurance and investment advisory products; (3) as a holding
company, we depend on dividends from our subsidiaries; Massachusetts insurance
law, and similar Canadian laws, may restrict the ability of John Hancock Life
Insurance Company and The Maritime Life Assurance Company to pay dividends
within the consolidated group; (4) we face increasing competition in our retail
businesses from mutual fund companies, banks and investment management firms as
well as from other insurance companies; (5) declines or increased volatility in
the securities markets, and other economic factors, may adversely affect our
business, particularly our variable life insurance, mutual fund, variable
annuity and investment business; (6) due to acts of terrorism or other
hostilities, there could be business disruption, economic contraction, increased
mortality, morbidity and liability risks, generally, or investment losses that
could adversely affect our business; (7) our life insurance sales are highly
dependent on a third party distribution relationship; (8) customers may not be
responsive to new or existing products or distribution channels; (9) interest
rate volatility may adversely affect our profitability; (10) our net income and
revenues will suffer if customers surrender annuities and variable and universal
life insurance policies or redeem shares of our open-end mutual funds; (11) the
independent directors of our variable series trusts and of our mutual funds
could reduce the compensation paid to us or could terminate our contracts to
manage the funds; (12) under our Plan of Reorganization, we were required to
establish the closed block, a special arrangement for the benefit of a group of
our policyholders. We may have to fund deficiencies in our closed block, and any
overfunding of the closed block will benefit only the holders of policies
included in the closed block, not our shareholders; (13) there are a number of
provisions in our Restated Certificate of Incorporation and by-laws, laws
applicable to us, agreements that we have entered into with our senior
management, and our shareholder rights plan, that will prevent or discourage
takeovers and business combinations that our shareholders might otherwise
consider to be in their best interests; (14) we will face losses if the claims
on our insurance products, or reductions in rates of mortality on our annuity
products, are greater than we projected; (15) we face investment and credit
losses relating to our investment portfolio, including, without limitation, the
risks associated with the evaluation and determination by our investment
professionals of the fair value of investments as well as whether or not any
investments have been impaired on an other than temporary basis; (16) we may
experience volatility in net income due to changes in standards for accounting
for derivatives, consolidations and other changes or from new interpretations of
accounting standards that must be applied retroactively; (17) our United States
insurance companies are subject to risk-based capital requirements and possible
guaranty fund assessments; (18) the National Association of Insurance
Commissioners' codification of statutory accounting practices will adversely
affect the statutory surplus of John Hancock Life Insurance Company; (19) future
interpretations of NAIC Actuarial Guidelines may require us to establish
additional statutory reserves for guaranteed minimum death benefits under
variable annuity contracts; (20) we may be unable to retain personnel who are
key to our business; (21) we may incur losses from assumed reinsurance business
in respect of personal accident insurance and the occupational accident
component of workers compensation insurance; (22) litigation and regulatory
proceedings may result in financial losses, harm our reputation and divert
management resources; (23) we face unforeseen liabilities arising from an
acquisition and dispositions of businesses, and (24) we may incur multiple life
insurance claims as a result of a catastrophic event which, because of higher
deductibles and lower limits under our reinsurance arrangements, could adversely
affect the Company's future net income and financial position.

     Readers are also directed to other risks and uncertainties discussed, as
well as to further discussion of the risks described above, in other documents
filed by the Company with the United States Securities and Exchange Commission.
The Company specifically disclaims any obligation to update or revise any
forward-looking information, whether as a result of new information, future
developments, or otherwise.


                                      105
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

ITEM 3. QUANTITATIVE and QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Capital Markets Risk Management

      The Company maintains a disciplined, comprehensive approach to managing
capital market risks inherent in its business operations.

      To mitigate these risks, and effectively support Company objectives,
investment operations are organized and staffed to focus investment management
expertise on specific classes of investments, with particular emphasis placed on
private placement markets. In addition, a dedicated unit of asset / liability
risk management (ALM) professionals centralizes the Life Insurance Company's and
its subsidiaries' implementation of the interest rate risk management program.
As an integral component of its ALM program, derivative instruments are used in
accordance with risk reduction techniques established through Company policy and
with formal approval granted from the New York Insurance Department. The
Company's use of derivative instruments is monitored on a regular basis by the
Company's Investment Compliance Department and reviewed quarterly with senior
management and the Committee of Finance of the Company's wholly-owned
subsidiary, John Hancock Life Insurance Company (the Company's Committee of
Finance).

      The Company's principal capital market exposures are credit and interest
rate risk, which includes the impact of inflation, although we have certain
exposures to changes in equity prices and foreign currency exchange rates.
Credit risk pertains to the uncertainty associated with the ability of an
obligor or counterparty to continue to make timely and complete payments of
contractual principal and interest. Interest rate risk pertains to the change in
fair value that occurs within fixed maturity securities or liabilities as market
interest rates move. Equity and foreign currency risk pertain to price
fluctuations, associated with the Company's ownership of equity investments or
non-US dollar denominated investments, driven by dynamic market environments.

Credit Risk

      The Company manages the credit risk inherent in its fixed maturity
securities by applying strict credit and underwriting standards, with specific
limits regarding the proportion of permissible below-investment-grade holdings.
We also diversify our fixed maturity securities with respect to investment
quality, issuer, industry, geographical, and property-type concentrations. Where
possible, consideration of external measures of creditworthiness, such as
ratings assigned by nationally recognized rating agencies such as Moody's and
Standard & Poor's, supplement our internal credit analysis. The Company uses
simulation models to examine the probability distribution of credit losses to
ensure that it can readily withstand feasible adverse scenarios. In addition,
the Company periodically examines, on various levels of aggregation, its actual
default loss experience on significant asset classes to determine if the losses
are consistent with the (1) levels assumed in product pricing, (2) rating
agencies' quality-specific cohort default data. These tests have generally found
the Company's aggregate experience to be favorable relative to the external
benchmarks and consistent with priced-for-levels.

      The Company has a process in place that attempts to identify securities
that could potentially have an impairment that is other than temporary. This
process involves monitoring market events that could impact issuers' credit
ratings, business climate, management changes, acquisition, litigation and
government actions, and other similar factors. This process also involves
monitoring late payments, downgrades by rating agencies, key financial ratios,
financial statements, revenue forecasts and cash flow projections as indicators
of credit issues.

      At the end of each quarter, our Investment Review Committee reviews all
securities where market value is less than ninety percent of amortized cost for
three months or more to determine whether impairments need to be taken. This
committee includes the head of workouts, the head of each industry team, the
head of portfolio management, the Chief Investment Officer, and the Corporate
Risk Officer who reports to the Chief Financial Officer. The analysis focuses on
each company's or project's ability to service its debts in a timely fashion and
the length of time the security has been trading below cost. The results of the
analysis are reviewed by the Life Company's Committee of Finance, a subcommittee
of the Board of Directors, quarterly. To supplement this process, a quarterly
review is made of the entire fixed maturity portfolio to assess credit quality,
including a review of all impairments with the Life Company's Committee of
Finance.

      The Company considers and documents relevant facts and circumstances in
evaluating whether the impairment of a security is other than temporary.
Relevant facts and circumstances considered include (1) the length of time the
fair value has been below cost; (2) the financial position of the issuer,
including the current and future impact of any specific events; and (3) the
Company's ability and intent to hold the security to maturity or until it
recovers in value. To the extent the Company determines that a security is
deemed to be other than temporarily impaired, the difference between amortized
cost and fair value would be charged to earnings.


                                      106
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      There are a number of significant risks and uncertainties inherent in the
process of monitoring impairments and determining if an impairment is other than
temporary. These risks and uncertainties include (1) the risk that our
assessment of an issuer's ability to meet all of its contractual obligations
will change based on changes in the credit characteristics of that issuer, (2)
the risk that the economic outlook will be worse than expected or have more of
an impact on the issuer than anticipated , (3) fraudulent information could be
provided to our investment professionals who determine the fair value estimates
and other than temporary impairments and (4) the risk that new information
obtained by us or changes in other facts and circumstances lead us to change our
intent to hold the security to maturity or until it recovers in value.

      Any of these situations could result in a charge to earnings in a future
period to the extent of the impairment charge recorded. Because the majority of
our portfolio is classified as available-for-sale and held at fair value with
the related unrealized gains (losses) recorded in shareholders' equity, the
charge to earnings would not have a significant impact on shareholders' equity.

      As of September 30, 2003 and December 31, 2002, 89.2% and 88.8% of the
fixed maturity securities held by the Company and rated by S&P or NAIC were
investment grade while 10.8% and 11.2% were below-investment-grade securities,
respectively. These percentages are consistent with recent experience and
indicative of the Company's long-standing investment philosophy of pursuing
moderate amounts of credit risk in return for higher expected returns. We
believe that credit risk can be successfully managed given our proprietary
credit evaluation models and experienced personnel.

Interest Rate Risk

      The Company maintains a tightly controlled approach to managing its
potential interest rate risk. Interest rate risk arises from many of our primary
activities, as we invest substantial funds in interest-sensitive assets to
support the issuance of our various interest-sensitive liabilities, primarily
within our Protection, Asset Gathering and Guaranteed & Structured Financial
Products Segments.

      We manage interest rate sensitive segments of our business, and their
supporting investments, under one of two broadly defined risk management methods
designed to provide an appropriate matching of assets and liabilities. For
guaranteed rate products, where contractual liability cash flows are highly
predictable (e.g., GICs or immediate annuities) we apply sophisticated
duration-matching techniques to manage the segment's exposure to both parallel
and non-parallel yield curve movements. Typically this approach involves a
targeted duration mismatch of zero with an operational tolerance of less than
+/-18 days, with other techniques used for limiting exposure to non-parallel
risk. Duration measures the sensitivity of the fair value of assets and
liabilities to changes in interest rates. For example, should interest rates
increase by 100 basis points, the fair value of an asset with a 5-year duration
is expected to decrease in value by approximately 5.0%. For non-guaranteed rate
products we apply scenario-modeling techniques to develop investment policies
with what we believe to be the optimal risk/return tradeoff given our risk
constraints. Each scenario is based on near term reasonably possible
hypothetical changes in interest rates that illustrate the potential impact of
such events.

      We project asset, liability and derivatives cash flows on guaranteed rate
products and then discount them against credit-specific interest rate curves to
attain fair values. Duration is then calculated by re-pricing these cash flows
against a modified or "shocked" interest rate curve and evaluating the change in
fair value versus the base case. As of September 30, 2003 and December 31, 2002,
the fair value of fixed maturity securities and mortgage loans supporting
duration managed liabilities was approximately $39,226.7 million and $36,143.0
million, respectively. Based on the information and assumptions we use in our
duration calculations in effect as of September 30, 2003, we estimate that a 100
basis point immediate, parallel increase in interest rates ("rate shock") would
have no effect on the net fair value, or surplus, of our duration managed
segments (including derivatives), based on our targeted mismatch of zero, but
could be -/+ $19.6 million based on our operational tolerance of 18 days.

      The risk management method for non-guaranteed rate products, such as whole
life insurance or single premium deferred annuities, is less formulaic, but more
complex, due to the less predictable nature of the liability cash flows. For
these products, we manage interest rate risk based on scenario-based portfolio
modeling that seeks to identify the most appropriate investment strategy given
probable policyholder behavior and liability crediting needs under a wide range
of interest rate environments. As of September 30, 2003 and December 31, 2002,
the fair value of fixed maturity securities and mortgage loans supporting
liabilities managed under this modeling was approximately $37,861.4 million and
$32,982.6 million, respectively. A rate shock (as defined above) as of September
30, 2003 would decrease the fair value of these assets by $1,494.2 million,
which we estimate would be offset by a comparable change in the fair value of
the associated liabilities and derivatives, thus minimizing the impact on
surplus.


                                      107
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

      Derivative instruments such as futures contracts and interest rate swaps
are used to hedge interest rate risk in our asset and liability portfolios, in
support of our duration management programs. Under both interest rate risk
management methods described above, we perform comprehensive quarterly
assessments of interest rate risk and compare those results to our investment
guidelines. Any deviations outside of operational tolerances are immediately
correct using derivative instruments. Additionally, we monitor duration mismatch
on an effective "real time" basis and apply derivatives as needed to eliminate
deviations from our target duration mismatches.

Derivative Instruments

      The Company uses a variety of derivative financial instruments, including
swaps, caps, floors, and exchange traded futures contracts, in accordance with
Company policy. Permissible derivative applications include the reduction of
economic risk (i.e., hedging) related to changes in yields, prices, cash flows,
and currency exchange rates. In addition, certain limited applications of
"income generation" are allowed. Examples of this type of use include the
purchase of call options to offset the sale of embedded options in Company
liability issuance or the purchase of swaptions to offset the purchase of
embedded put options in certain investments. The Company does not make a market
or trade derivatives for speculative purposes.

      As of January 1, 2001, the Company adopted SFAS No. 133, which became
effective for all companies reporting under GAAP in the United States. Briefly
stated, SFAS No. 133 requires that all derivative instruments must be recorded
as either assets or liabilities on the Company's balance sheet, with quarterly
recognition thereafter of changes in derivative fair values through its income
statement. The income effect of derivatives that meet all requirements of a
"qualified hedge" under SFAS No. 133 guidance may be offset, in part or in its
entirety, by recognition of changes in fair value on specifically identified
underlying hedged-items. These hedged-items must be identified at the inception
of the hedge and may consist of assets, liabilities, firm commitments or
forecasted transactions. Depending upon the designated form of the hedge (i.e.,
fair value or cash flow), changes in fair value must either be recorded
immediately through income or through shareholders' equity (other comprehensive
income) for subsequent amortization into income.

      The Company's Investment Compliance Unit monitors all derivatives activity
for consistency with internal policies and guidelines. All derivatives trading
activity is reported monthly to the Company's Committee of Finance for review,
with a comprehensive governance report provided jointly each quarter by the
Company's Derivatives Supervisory Officer and Chief Investment Compliance
Officer. The table below reflects the Company's derivative positions hedging
interest rate risk as of September 30, 2003. The notional amounts in the table
represent the basis on which pay or receive amounts are calculated and are not
reflective of credit risk. These exposures represent only a point in time and
will be subject to change as a result of ongoing portfolio and risk management
activities.

<TABLE>
<CAPTION>
                                                                  As of September 30, 2003
                                      ---------------------------------------------------------------------------------
                                                                                         Fair Value
                                                                       ------------------------------------------------
                                                          Weighted
                                          Notional      Average Term   -100 Basis Point     As of     +100 Basis Point
                                           Amount          (Years)        Change (2)       9/30/03       Change (2)
                                      ---------------------------------------------------------------------------------
                                                      (in millions, except for weighted average term)
<S>                                     <C>                 <C>           <C>              <C>           <C>
Interest rate swaps...............      $   30,790.1         11.9         $   (278.2)      $  (601.4)    $   (804.6)
CMT swaps.........................              33.4          1.1                1.0             1.0            0.9
Futures contracts (1).............             243.2          7.3                6.9            (1.7)         (11.0)
Interest rate caps................           1,068.2          5.2               21.2            27.6           40.5
Interest rate floors..............           4,593.0          6.6              172.1            90.8           45.0
Swaptions.........................              30.0         21.7               (7.2)           (3.0)          (0.8)
                                      -----------------                ------------------------------------------------
   Totals.........................      $   36,757.9                      $    (84.1)      $  (486.7)    $   (730.0)
                                      =================                ================================================
</TABLE>

(1)   Represents the notional value of open contracts as of September 30, 2003.
(2)   The selection of a 100 basis point immediate change in interest rates
      should not be construed as a prediction by us of future market events but
      rather as an illustration of the potential impact of such an event.

      Our non-exchange-traded derivatives are exposed to the possibility of loss
from a counterparty failing to perform its obligations under terms of the
derivative contract. We believe the risk of incurring losses due to
nonperformance by our counterparties is remote. To manage this risk, Company
procedures include the (a) on-going evaluation of each counterparty's credit
ratings, (b) the application of credit limits and monitoring procedures based on
an internally developed, scenario-based risk assessment system, (c) quarterly
reporting of each counterparty's "potential exposure", (d) master netting
agreements and, (e) the use of collateral agreements. Futures contracts trade on
organized exchanges and, therefore, have effectively no credit risk.


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<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

Equity Risk

      Equity risk is the possibility that we will incur economic losses due to
adverse changes in a particular common stock or warrant that we hold in our
portfolio. In order to reduce our exposure to market fluctuations on some of our
common stock portfolio, we use equity collar agreements. These equity collar
agreements limit the market value fluctuations on their underlying equity
securities. Our equity collars are comprised of an equal number of purchased put
options and written call options, each with strike rates equidistant from the
stock price at the time the contract is established. As of September 30, 2003
and December 31, 2002, the fair value of our equity securities portfolio was
$134.8 million and $152.9 million. The fair value of our equity collar
agreements as of September 30, 2003 and December 31, 2002 was $5.9 million and
$12.6 million. A hypothetical 15% decline in the September 30, 2003 value of the
equity securities would result in an unrealized loss of approximately $16.0
million. The selection of a 15% immediate change in the value of equity
securities should not be construed as a prediction by us of future market events
but rather as an illustration of the potential impact of such an event. The fair
value of any unhedged common stock holdings will rise or fall with equity market
and company-specific trends. In certain cases the Company classifies its equity
holdings as trading securities. Gains and losses, both realized and unrealized,
on equity securities classified as trading, are part of investment returns
related to equity indexed universal life insurance policies sold at Maritime
Life and are included in benefits to policyholders. These holdings are
marked-to-market through the income statement, creating investment income
volatility that is effectively neutralized by changes in corresponding liability
reserves.

Foreign Currency Risk

      Foreign currency risk is the possibility that we will incur economic
losses due to adverse changes in foreign currency exchange rates. This risk
arises in part from our international operations, our Maritime Life Segment and
the issuance of certain foreign currency-denominated funding agreements sold to
non-qualified institutional investors in the international market. We don not
hedge the exposure from our international operations or our Maritime Life
Segment. We apply currency swap agreements to hedge the exchange risk inherent
in our funding agreements denominated in foreign currencies. We also have
exposure that arises from owning fixed maturity securities that are denominated
in foreign currencies. We use currency swap agreements to hedge the foreign
currency risk of these securities (both interest and principal payments). At
September 30, 2003 and December 31, 2002, the fair value of our foreign currency
denominated fixed maturity securities was approximately $1,017.0 million and
$799.3 million. The fair value of our currency swap agreements at September 30,
2003 and December 31, 2002 supporting foreign denominated bonds was $(174.0)
million and $(24.5) million.

      We estimate that as of September 30, 2003, a hypothetical 10% immediate
change in each of the foreign currency exchange rates to which we are exposed,
including the currency swap agreements, would result in no material change to
the net fair value of our foreign currency-denominated instruments identified
above. The selection of a 10% immediate change in all currency exchange rates
should not be construed as a prediction by us of future market events but rather
as an illustration of the potential impact of such an event. Our largest
individual currency exposure is to the Canadian dollar.

      The modeling technique we use to calculate our exposure does not take into
account correlation among foreign currency exchange rates or correlation among
various markets. Our actual experience may differ from the results noted above
due to the correlation assumptions utilized or if events occur that were not
included in the methodology, such as significant illiquidity or other market
events.

Effects of Inflation

      Inflation has not been a material factor in our operations during the past
decade in terms of our investment performance, expenses, or product sales.


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<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

ITEM 4. CONTROLS and PROCEDURES

      An evaluation was carried out under the supervision and with the
participation of the Company's management, including its Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the disclosure controls and
procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934,
as amended). Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the disclosure controls and procedures were
effective as of the end of the period covered by this report.

      No change in the Company's internal control over financial reporting (as
defined in Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended)
occurred during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Harris Trust Litigation

      Since 1983, the Company has been involved in complex litigation known as
Harris Trust and Savings Bank, as Trustee of Sperry Master Retirement Trust No.
2 v. John Hancock Mutual Life Insurance Company (S.D.N.Y. Civ. 83-5491). After
successive appeals to the Second Circuit and to the U.S. Supreme Court, the case
was remanded to the District Court and tried to a Federal District Court judge
in 1997. The judge issued an opinion in November 2000.

      In that opinion the Court found against the Company and awarded the Trust
approximately $13.8 million in relation to this claim together with unspecified
additional pre-judgment interest on this amount from October 1988. The Court
also found against the Company on issues of liability valuation and ERISA law.
Damages in the amount of approximately $5.7 million, together with unspecified
pre-judgment interest from December 1996, were awarded on these issues. As part
of the relief, the judge ordered the removal of Hancock as a fiduciary to the
plan. On April 11, 2001, the Court entered a judgment against the Company for
approximately $84.9 million, which includes damages to the plaintiff,
pre-judgment interest, attorney's fees and other costs.

      On May 14, 2001 the Company filed an appeal in this case. On August 20,
2002, the Second Circuit Court of Appeals issued a ruling, affirming in part,
reversing in part, and vacating in part the District Court's judgment in this
case. The Second Circuit Court of Appeals' opinion overturned substantial
portions of the District Court's opinion, representing the vast majority of the
lower court's award of damages and fees, and sent the matter back to the
District Court for further proceedings. The matter remains in litigation, and no
final judgment has been entered.

      The parties recently reached an agreement in principle with respect to
settlement of this matter. The amount of the proposed settlement has been taken
into account in reserves established in this and in previous quarters.

      If the proposed settlement is not finalized and the litigation is not
otherwise settled, notwithstanding what the Company believes to be the merits of
its position in this case, if unsuccessful, the Company's ultimate liability,
including fees, costs and interest could have a material adverse impact on net
income. However, the Company does not believe that any such liability would be
material in relation to its financial position or liquidity.


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<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

ITEM 6. EXHIBITS and REPORTS on FORM 8-K

a)  Exhibits

Exhibit
Number      Description
------      -----------

2.1         Agreement and Plan of Merger, dated as of September 28, 2003, by and
            among Manulife Financial Corporation, John Hancock Financial
            Services, Inc. and Jupiter Merger Corporation, a Delaware
            corporation and a direct wholly-owned subsidiary of Manulife
            ("Merger Co."). *

10.1        Third Amendment dated as of July 25, 2003 to the $1,000,000,000
            Credit Agreement dated as of August 3, 2000, as amended, among John
            Hancock Financial Services, Inc., John Hancock Life Insurance
            Company, The Banks listed therein, Fleet National Bank, as
            Co-Administrative Agent, JPMorgan Chase Bank, as Co-Administrative
            Agent, Citicorp USA, Inc., as Syndication Agent, The Bank of New
            York, as Documentation Agent (364-Day Revolver) and Wachovia Bank,
            National Association as Documentation Agent (364-Day Revolver),
            Fleet Securities, Inc., and J.P. Morgan Securities, Inc., as Joint
            Bookrunners and Joint Lead Arrangers **

10.2        Amendment No. 1, dated September 28, 2003, to the Employment
            Continuation Agreement dated October 15, 2001 by and among John
            Hancock Life Insurance Company, John Hancock Financial Services,
            Inc., Michael A. Bell and Manulife Financial Corporation. ** +

10.3        Amendment No. 1, dated September 28, 2003, to the Employment
            Continuation Agreement dated April 1, 2003 by and among John Hancock
            Life Insurance Company, John Hancock Financial Services, Inc., James
            M. Benson and Manulife Financial Corporation. ** +

10.4        Amendment No. 1, dated September 28, 2003, to the Amended and
            Restated Employment Continuation Agreement dated January 1, 2003 by
            and among John Hancock Life Insurance Company, John Hancock
            Financial Services, Inc., Wayne A. Budd and Manulife Financial
            Corporation. ** +

10.5        Amendment No. 1, dated September 28, 2003, to the Second Amended and
            Restated Employment Continuation Agreement dated October 15, 2001 by
            and among John Hancock Life Insurance Company, John Hancock
            Financial Services, Inc., David F. D'Alessandro and Manulife
            Financial Corporation. ** +

10.6        Amendment No. 1, dated September 28, 2003, to the Second Amended and
            Restated Employment Continuation Agreement dated October 15, 2001 by
            and among John Hancock Life Insurance Company, John Hancock
            Financial Services, Inc., Thomas E. Moloney and Manulife Financial
            Corporation. ** +

31.1        Chief Executive Officer Certification Pursuant to Rules 13a-14 and
            15d-14 of the Securities Exchange Act of 1934 **

31.2        Chief Financial Officer Certification Pursuant to Rules 13a-14 and
            15d-14 of the Securities Exchange Act of 1934 **

32.1        Chief Executive Officer certification pursuant to 18 U.S.C. Section
            1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002 **

32.2        Chief Financial Officer certification pursuant to 18 U.S.C. Section
            1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002 **

----------
*     Previously filed as an exhibit to John Hancock Financial Services, Inc.'s
      current report on Form 8-K filed with the Securities and Exchange
      Commission on October 1, 2003, and incorporated by reference herein.
**    Filed herewith.
+     Management contract or compensatory plan or arrangement.


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<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

b) Reports on Form 8-K.

      During the Third Quarter of 2003 the Company filed the following Current
Reports on Form 8-K:

      On August 1, 2003, the Company filed a Current Report on Form 8-K, dated
July 31, 2003 reporting under Item 5 and Item 7 thereof the Company's operating
and financial results for the second quarter of 2003.

      On October 1, 2003, the Company filed a Current Report on Form 8-K, dated
September 28, 2003 reporting the proposed merger transaction with Manulife
Financial Corporation.


                                      112
<PAGE>

                      JOHN HANCOCK FINANCIAL SERVICES, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                           JOHN HANCOCK FINANCIAL SERVICES, INC.


Date: November 7, 2003                     By: /s/ THOMAS E. MOLONEY
                                               ---------------------
                                               Thomas E. Moloney
                                               Senior Executive Vice
                                               President and Chief Financial
                                               Officer


                                       113